Farmers’ Ability to Pay for Irrigation Water in the Jordan Valley

Abstract

This study aims to analyze the famers’ ability to pay for irrigation water in Jordan Valley to investigate the farmer capacity to cope with increasing the water tariff. The residual imputation approach was used based on the enterprise budget for crops cultivated in different geographical locations in Jordan Valley. This methodology deducts the contribution of non-water production inputs, annualized capital cost and fixed costs from the gross output and attributes the remaining value to water. The resulting water value is an indication of the economic efficiency of water and a proxy for the maximum farmer’s ability to pay for water. The result shows that cucumber has the highest ability to pay (JD 2.26 m-3); the percentage of water cost to total cost is 1.1%. This low percent does not encourage farmers to save water. The weighted average for maximum farmers’ ability to pay for irrigation water in Jordan valley is estimated at JD 0.76 m-3. The result shows the farmer’s ability to pay for water used in plastic house is JD 1.34 m-3 compared to JD 0.62 m-3 for open field. The estimated value of desalinated brackish water is JD 0.59 m-3 while the average desalination cost is JD 0.28 m-3. Therefore, the current practice of installing Reverse Osmosis units to irrigate high value cash crops by some farmers is economically rational, since water value is twice the desalination cost of one cubic meter. If farmers have to pay the cost of O&M, they need to pay at least JD 0.065 m-3. Increasing the water prices could encourage more efficient water use, shifts to higher value crops, adoption of plastic houses, and encourage desalination of brackish water.