Efficient irrigation water development in Pakistan: Pricing issues and options

Irrigation water shortages have lately been a main area of concern for policy makers and planners in Pakistan. Current literature on the country's water resources predicts an alarming situation regarding the availability of irrigation water in the future due to declining water tables and enormous costs of developing storage reservoirs due to financial, environmental and social constraints. Since there is little room to augment water supplies through building new dams, the existing supply-driven surface irrigation system needs to be replaced by a demand-based system with special focus on water use efficiency through the introduction of an appropriate water pricing system.;Keeping the above water scenario in view, the major objective of this study is to focus on devising an appropriate mechanism for determining an efficient water pricing system. For this purpose, 601 farmers in nine districts—Attock, Charsadda, Kulachi, Lodhran, Mardan, Mianwali, Mirpur Khas and Thatta, across the three provinces—North West Frontier Province (NWFP), Punjab and Sindh—have been interviewed and data on production, output prices and traditional inputs used in the agricultural production processes have been collected. An appropriate agricultural production function has been specified and estimated. An input demand function for irrigation water has then been derived which has been used as a bridge between production function estimation and water demand policy simulations in analysing alternative water pricing systems.;A major conclusion that emerges from this research is that irrigation water shortages are the result of the inflexibility of the present irrigation water supply system for agricultural use and have little to do with the water pricing practice in Pakistan. Two findings from the pricing policy perspective are: (i) irrigation water is not available in adequate quantity to farmers in all districts at almost all of the alternative prices in Pakistan's irrigated agriculture sector since the predicted water usage at all prices is greater than the actual usage for all districts; and (ii) subject to various limitations of data and modelling, our empirical analysis indicates significant inefficiencies of resource allocation for three inputs with irrigation water being the least inefficient in terms of water use efficiency in the agriculture sector. Another conclusion is that the irrigation system which seems to look inefficient on the surface may not actually be so if the downsizing/rightsizing policy of the government is successfully implemented, the corrupt practices by the irrigation departments' officials stopped and a more effective water pricing system is implemented.