February 25, 2005

2005: Highlight # 11

How would farmers respond to different power tariff and water allocation regimes? Kumar presents a theoretical model...

Impact of Water Prices and Volumetric Water Allocation on Water Productivity

Comparative Analysis of Well Owners, Water Buyers and Shareholders

M. Dinesh Kumar

The paper presents a theoretical model to analyze farmers' response to changes in power tariff and water allocation regimes vis-à-vis energy and groundwater use. It validates the model by analyzing water productivity in groundwater irrigation under different electricity pricing structures and water allocation regimes. Water productivity was estimated using primary data of gross crop output, cost of all inputs, and volumetric water inputs.

The analysis shows that unit pricing of electricity influences groundwater use efficiency and productivity positively. It also shows that the level of pricing at which demand for electricity and groundwater becomes elastic to tariff are socio-economically viable. Further, water productivity impacts of pricing would be highest when water is volumetrically allocated with rationing.

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