Price Sensitivity of Farmer Preferences for Irrigation Water–Pricing Method: Evidence from a Choice Model Analysis in Krishna River Basin, India

Abstract

Water pricing is one of the water-demand management tools advocated to improve water allocation, water-use efficiency, equity, and sustainability. Often, however, little attention is paid to farmers’ cooperation, which is necessary for introducing efficient irrigation water pricing. This paper studies the price sensitivity of the preferences for water-pricing methods in a broader water-rights system perspective in the Krishna River basin in India. We applied a choice experiment to investigate farmers’ preferences for and the efficiency of a given pricing method based on willingness to pay estimates. The results indicate that farmers never prefer the existing area pricing system. At higher price levels, farmers would chose volumetric pricing followed by quota pricing, whereas at low price levels quota pricing is preferred. Price sensitivity of farmer preferences for volumetric pricing is high. Since water prices are expected to rise in the future as Indian water policies intend to eventually recover the full costs of irrigation water, volumetric-based pricing methods will probably be the most acceptable solution from the farmers’ perspective.