Estimation the economic value of irrigation water for rice farms in Iran

Abstract

In Iran, there is a huge difference between the amount of water supply and demand in all sectors of the economy, especially in agriculture sector as the most consumer sector. Economic valuation is used as a strategy to balance supply and demand. The purpose of this study was to determine the economic value of agricultural water in rice farm of Khuzestan province. The farms were divided into two groups based on homogeneity and using cluster analysis method. Then, using the production function and analysis of five flexible and non-flexible functions, the best function was selected by statis-tical comparisons and finally the economic value of each group was calcu-lated. Cross-section data obtained from the Iranian Ministry of Agriculture production costing questionnaires during 2015-2016 crop years were used in this study. The economic value of water in the first group with transcendental function was 0.4783$/ and in the second group with generalized Leontief function was calculated 0.5479 $/. Reforming the current tariff system and reducing the water price gap to reduce losses on rice farms and increase water productivity is an effective measure to increase water productivity. Therefore, the increase in water tariff was considering the economic and social conditions of the area under study. Creating local water markets is effective in changing farmers’ view of water as public entity and understanding its true value.