The Policy of Irrigation Water Pricing in Pakistan: Aims, Assessment and Needed Redirections

Abstract

Pakistan operates the world's largest well-articulated irrigation system. Individual farms receive water from the gravity flow of a massive network of canals, distributaries and watercourses fed by the Indus River and its tributaries. In recent years public tubewells have become an additional, though somewhat limited, source of irrigation water. The canal system, which has been in operation for more than 100 years, is believed to have become too obsolete to cater for the needs of modern agriculture and is, therefore, in desperate need for rehabilitation. But resource-poor Pakistan cannot undertake the rehabilitation work on its own, and must depend on foreign loans or at least ensure full recovery of annual operation and maintenance (0 and M) expenditures [Chaudhry (1985); Duane (1975) and Hotes (1984)]. Apart from generating investment funds, the cost recovery, with higher water charges, would also lead to greater water-use efficiency and an equitable income distribution at the farm level [Chaudhry (1985) and Hotes (1984»). Can this all be accomplished by simply raising water charges? In this paper, we have attempted to answer this question. To answer the question systematically, we have divided the paper in five sections. The current state of Pakistan's irrigation system, water charges and cost recovery is discussed in Section 2. Section 3 deals with possible impact of rising water charges on cost recovery, investments, efficiency of water use and income distribution under the current system of water pricing. Section 4 presents policy alternatives that would ensure an effective cost recoyery, greater water-use efficiency and a more equitable distribution of farm income. Section 5 presents the summary and conclusions of the paper.

Financial Capacity and Willingness of Farmers to Pay for Irrigation Services in the Post-reform Scenario in Pakistan: Two Case Studies

“…The variation in water charges among various crops is based on water requirements for those crops. However, the relationship is neither systematic nor directly proportional to the consumptive use of water by various crops [Chaudhry, et al (1993)]. For instance, the water rates for rice and sugarcane should be much higher than those for cotton.…”

Water pricing in irrigation: mapping the debate in the light of experience.

“…The magnitude of this taxation amounted -to borrow from Schiff and Valdés (1992) -to a 'plunder' of agriculture during . In Mexico, the price distortion amounted to an implicit tax of 20-50% of the value of the project commodities (Duane, 1986) and similar state extractive policies were carried out in most developing countries, including Egypt (Barakat, 2002), Thailand (Molle,Chapter 5,this volume), Malaysia (World Bank, 1986), Pakistan (Chaudhry et al, 1993), Côte d'Ivoire, Ghana and Sri Lanka (Krueger et al, 1991;Schiff and Valdés, 1992). Low food prices benefited the urban poor and landless, and taxes on output generated public savings for investment in industrial and urban development, only partially offset by irrigation and other rural subsidies (Lipton, 1977).…”

Pricing Irrigation Water in Pakistan: An Evaluation of Available Options

“…In Pakistan, where agriculture uses 90 percent of irrigation water, water rates charged to farmers have always been minimal. Because of the nature of the irrigation system and because of the administrative structure designed to supervise it, charges for irrigation water have been made on an acreage-not a volume-basis [Lewis (1969); Chaudhry, Majid, and Chaudhry (1993)]. These charges vary widely between crops.…”

“…It has been alleged that charges for irrigation water discriminated between various crops in such a way as to distort resource allocation. Moreover, it has generally been argued that water was and is being provided by the public sector at appreciably less than its marginal cost [Chaudhry, Majid, and Chaudhry (1993)]. Some awareness of the different amount of water required by different crops has been introduced by applying differential rates per acre, but these differentials have not been fully compensated for the differences in water use [Lewis (1969); Haufbauer and Akhtar (1970)].…”