1. Introduction
Irrigation in Pakistan is indispensable for agriculture, as is true for most of the World’s arid and semiarid environments. The area of irrigated land in Pakistan has grown from about 11.6 million hectares in 1947 to nearly 22.6 million ha in 1997 [
1]. Therefore, irrigated farming accounts for 75% of total water withdrawals [
2].
The preamble of the recent research done in the context of food and water security states that water supplies in Pakistan are threatened by human-induced pressures. Moreover, the quality of aquatic ecosystems is experiencing severe deterioration due to climate change [
3]. This deterioration of the ecosystem can have a serious adverse impact on Pakistan’s economy in general and Punjab’s (a province of Pakistan) in particular. The majority of Punjab’s rural work force (as much as 60%) is engaged in the field of agriculture either directly (i.e., farming) or indirectly (i.e., working in agriculture-based industries) [
4].
Pakistan has a financially unsustainable irrigation system owing to the fact that the water pricing is independent of the actual volume of water supplied to the farm land, which results in wastage of water by farmers. In the absence of incentives, farmers inundate their entire fields through flood irrigation rather than irrigating the crops through a high-efficiency irrigation system (HEIS), resulting in low water productivity. Dinar and Subramanian [
5] argued that proper water pricing improves water use efficiency, water allocation efficiency and raises revenue for general purposes. Burt [
6] categorized the global water pricing systems as; (1) No irrigation fees at all; (2) Area-based pricing system in which the end-user is charged a fixed rate per unit of farm (or irrigated area); (3) Crop-based water pricing mechanism which defines a variable rate per hectare depending on the type of crop irrigated; (4) Volumetric method which establishes fixed or variable rates per unit of water received; and (5) Per irrigation water charges. Roger et al. [
7] proposed three levels of water costs which can comprehensively form the basis of a water pricing mechanism, viz., full supply cost, full economic cost, and full cost (see
Figure 1).
“Cost recovered” generally refers to the percentage of the full supply cost collected from the farmers. The full supply cost can be defined readily, owing to the ease in the estimation of its parameters (i.e., O&M cost and Establishment). However, the “full economic cost” and “full cost” are difficult to estimate due to the increased complexity involved in the estimation of the opportunity cost and other parameters [
8].
In the case of Pakistan, water charges are based on either area or season-based flat rates. The present water pricing system does not encourage water use efficiency as it fails to relate the water price to the actual water volume supplied to the field [
9]. Similarly, other major water pricing issues in Pakistan are the absence of linkage between water fee collection and service provision (lack of financial autonomy) and the lack of incentives for service providers to collect charges [
10,
11].
Several environmental laws, which support the use of economics as a key discipline to reach the objective of a self-sustainable irrigation system, have been introduced (e.g., [
12,
13]). The Water Framework Directive (WFD) approach hinges on the notion of full cost recovery for water services including environmental and resource costs from the farmers, which is precisely one of the most novel and interesting aspects in the norm. The WFD further strengthens the call for inculcating economic analysis to find the economic value of water for different alternatives to improve the water supply system for improved environmental status. [
13] fully describes the implementation of WFD and explains the idea of full water cost coverage based on the concept of “water services”.
Such analyses are urgent in regions like the Punjab province of Pakistan, where water scarcity is a critical issue. The province currently recovers only 20% of its irrigation water supply cost from consumers and intends to ensure full cost recovery as part of a new reform process [
14]. The use of economic instruments such as full cost recovery and the analysis of measures applied to the irrigation sector need to take into account the level of demand for irrigation water in order to quantify the response of water use against the proposed measures (e.g., water saving as a response to increased water price). For this purpose, a detailed economic valuation of irrigation water might be useful to support the water pricing mechanism at the local scale.
Heal et al. [
15] thoroughly discussed the methods available in literature to calculate the economic value of goods and services. The methods were later reviewed by Young [
16] to estimate the economic value of water. Heal et al. [
15] argues that in order to find the economic value of an unpriced input such as water, its contribution to the total value of the produced output should be isolated from the other inputs by subtracting their value addition to the product. Based on the data extracted from field experiments on crops in the 1970s and 1980s, the demand of irrigation water was estimated by statistically utilizing crop-water production functions [
17,
18]. The relationship between the output price and varying cost of water was studied to develop the demand functions.
Perhaps the most frequently used tool for estimating the value of irrigation water is linear programming (LP), which is based on the use of mathematical programing. The method presents an optimal solution by developing linearity between the constraints and objective function. The former is defined by the restrictions of the cropping area and water availability, whereas the latter is specified as the maximized return from several crops. The concept has been widely used for the estimation of the value of irrigation water; therefore, a large amount of literature can be found related to its application in the field of agriculture [
19]. Chaudhry et al. [
20] estimated the net return from water in Punjab province of Pakistan by using LP models. The study concluded that the marginal product value of irrigation water was high owing to its limited supply. However, the objective functions and constraints may not be linearly associated; hence the resulting regression equation may not be the true representative of the issue at hand [
21]. Some researchers argued about the rigidity of LP in addressing several objectives of conflicting nature, simultaneously [
22]. In this regard, Multicriteria Criteria Decision Making (MCDM) analysis is classified as a better alternative to LP (see [
23] for a review). Researchers have proposed a number of multicriteria approaches to solve the problems in farming systems related to decision making (see [
24] for a review of multicriteria methods in agricultural economics). A complete review of multicriteria methods was done by [
25]. The method is unique in the sense that the most decisive factor in its implementation is not the sensitivity of the algorithms but the ways in which the process is organized, including stakeholder involvement and facilitation, and the ways in which the results are presented [
26]. Berbel et al. [
27] evaluated sustainability of the irrigation sector of Europe under various policy scenarios by generating farm-level water demand curves through MCDM. The authors claim that the methodology well grasped the complexities related to the European agriculture. However, the MCDM methods are criticized by a number of researchers because the methods are: (1) prone to manipulation, resulting in a false sense of accuracy [
28] and (2) require the definition of a utility function, representing the preferences of decision-makers, through a complicated procedure [
29]. A complete criticism of MCDM methods can be found in Mutikanga [
30].
Occasionally, a hedonic method for estimating the value of irrigation water has also been employed and can be found in the literature to a limited extent. For example, Berbel and Mesa [
31] used this technique in Guadalquivir Basin of Spain to estimate the value of irrigation water. Besides its numerous advantages, the major drawback of the hedonic method is its inability to translate the implicit costs into a meaningful financial sum.
Most recently, a technique called the Residual Value Method (RVM) has been employed by several researchers. The technique considers water as an intermediate input for the production of crops. The underlying assumption for the application of the model is that the farmer will use water to an extent where the net revenue generated per additional unit of water is equal to the marginal cost of the water [
32]. Only a limited number of studies can be found in the literature making use of this technique [
33,
34] with almost no recently published studies. A complete review of this technique is provided by [
16]. Using farm budget surveys data from 1987 to 1991, Bate and Dubourg [
35] calculated the residual value of irrigation water applied to five crops in the eastern region of Anglia. Lange [
32] used the same technique in the Orange River basin of Namibia. Moran and Dann [
36] used secondary data sources in RVM to evaluate the economic value of water for the implementation of WFD. They further argued that the valuation of irrigation water will help in implementing the WFD. Speelman et al. [
37] and Esmaeili and Vazirzadeh [
38] applied the RVM technique for the valuation of irrigation water in South Africa and Iran, respectively.
In our work, we plan to use the RVM to execute the economic value of water for different crops. The estimated economic values define the income of farmers per unit of irrigation water applied to the crops. Afterwards, the full cost recovery figures are proposed for the operation and maintenance (O&M) of irrigation infrastructure by linking the water prices with the volume of water supplied to the field. Eventually, the implementation strategies are defined to ensure the same economic returns for the farmers during pre-and post-implementation phases of the full cost recovery prices.
2. Improved Water Pricing Mechanism: Why Now?
The province of Punjab, which is considered to be the agricultural hub of the country, is entitled to carry 55 million acre feet (MAF) of water according to Water Apportionment Accord 1991 [
39]. Out of total Punjab’s share, only 26 MAF (47.3%) reaches the farm gate while the rest is lost during conveyance in unlined water channels. These losses can be reduced from 60 to 80% by lining the water channels [
40]. Over the last few years, a lot of investment has been made to reduce the post-farm gate losses by lining the water courses through successful cost sharing agreement between the government and farmers. However, no such investment is ever made at the national level to line the irrigation canals and distributaries, apart from few individual canals and distributaries which are lined recently (e.g., Lower Chenab Canal).
Unfortunately, due to the sociopolitical uncertainty in the country, no new water reservoirs have been constructed since the formulation of the Water Accord of 1991. With no new water-storage infrastructure and rising water demand, the water supply to each province is stagnant. The delivery of the allocated volume of water to the farmland takes place through the networks of canals and distributaries. These canals and distributaries require a huge financial capital per annum for their operation and maintenance (O&M). To recover the cost of O&M, a flat rate system of water pricing is currently in place in Punjab. Under the flat rate system, water charges are fixed per hectare of area sown in Rabi (winter) and Kharif (summer) seasons regardless of the type of crop being irrigated. The nominal rates of 123.55 PKR (Pakistani Rupees)/hectare and 210.035 PKR/hectare (
$1 = 104.5 PKR) are charged for the winter (Rabi) and summer (Kharif) crops, respectively. The water charges are collected from the farmers by either the head of the village (locally called “Lambardar”) or by the chairman of farmer’s committee nominated by the Punjab Irrigation Department (PID). The flat rate water pricing system significantly increases the cropping intensities and production, but the system needs to be modified as it fails to ensure the sustainability of the irrigation system [
41]. Our hypothesis is that irrigation water in Punjab is severely under charged and there is a need to revise the pricing system to ensure the sustainability of the irrigation system.
The long-forgotten issue of irrigation water pricing took center stage when the Asian Development Bank (ADB) and the Government of Punjab got involved in a process to finalize the loan of 2 million dollars to upgrade the Agriculture sector of the province. One of the conditions which ADB reiterated from its previous suggestions is that the Government of Punjab needs to improve the irrigation water pricing mechanism of the province [
42]. Therefore, the aim of our research work is to find the value of irrigation water and then test the suitability of our newly developed pricing model which is based on the actual quantity of water supplied for irrigation. The model will suggest the appropriate prices of irrigation water for the study area to recover 100% of the O&M cost of irrigation system. The project will interpret the full cost recovery figures for three major crops (wheat, rice and sugarcane) grown in the area. It will also aid in understanding the issues and complexities related to the implementation of a full cost recovery mechanism. In the past, every effort to put in place such a mechanism was fully resisted by the average farmers of the area due to their delicate financial conditions, although the farmers were assured that the mechanism will be complimented with tax evasion in order to provide financial relief to them [
14]. Therefore, the project will also assist in framing a mechanism to increase water prices in such a way that the average farmers are not financially over-burdened.
3. Study Area
The major sources of irrigation water in Punjab are: (1) canal water which contributes 40% of the total irrigation water (26 MAF); (2) tubewell water supplies 50% of the total irrigation requirements (33 MAF); and (3) rainfall accounts for 10% of water supplies (7 MAF) for irrigation [
43,
44]. Since our ultimate objective is to find the value of canal water, we therefore had to select a site where canal water is a major means of irrigation. The culturable command area (CCA) of the Rakh branch canal is selected for the implementation of the proposed methodology. The selected area is predominately irrigated by canal water due to better infrastructure which includes a lined branch canal, distributaries, and the majority of water courses. The study area is irrigated by four lined distributaries (Ratti, Gilluana, Khair ali, and Gatti distributaries) of the Rakh branch canal. The lining of irrigation channels ensures the delivery of irrigation water according to the designed criteria. The Rakh branch canal receives perennial canal supplies from the Lower Chenab Canal (LCC) system during the entire year of canal operation except December when the canal is closed for maintenance. The selected distributaries are located at the head, middle, and tail sections of the Rakh branch. A schematic diagram of the LCC illustrating the arrangement of distributaries is given in
Figure 2.
The area is defined as a mixed cropping zone, and analogous to rest of the country, the farmers in the study area are authorized to use the entire volume of water diverted to the water course by the distributary outlet, on a 7-day rotation period under the system called “Warabandi” [
45]. Rice, wheat, and sugarcane are the main crops of the area while cotton and maize are not commonly cultivated in the area. The area is considered to be the most fertile area of the province with average output per hectare surpassing the national average. However, the area can still be more productive as the biological potential of the area is fairly higher than the present yield. The gap between average yield and biological potential for various crops in the study area is translated in the following
Table 1.
The details of the four distributaries irrigating a total of 10,615.136 hectares of the CCA are summed up in the following
Table 2.
Ratti distributary originates from the head reach of the Rakh Branch Canal and stretches to a length of 0.724 km. The distributary directly serves 3 outlets supplying irrigation water to a total CCA of 643.86 hectares. Each outlet is authorized for an average discharge of 0.0085 m3/s. A flumegate structure at the head of the distributary regulates the discharge magnitude in the distributary given that there is sufficient head available in the Branch canal.
Gilluana Distributary serves a CCA of 1951.437 hectares having a design discharge of 0.419 m3/s. The distributary extends to a total length of 2.832 km and supplies irrigation water to 9 outlets operating at an average authorized discharge of 0.0436 m3/s.
Khairali distributary covers a length of 14.934 km and feeds 28 outlets which ultimately supply irrigation water to 5655.200 hectares of CCA. The distributary is designed to carry a discharge of 1.313 m3/s and is the longest distributary in our selection. The average authorized designed discharge of its outlets is 0.042 m3/s.
Gatti distributary offshoots from the tail section of Rakh Branch Canal having a total length of 7.515 km and supplies water at a design discharge of 0.582 m3/s. It has 14 outlets operating an average flow rate of 0.0351 m3/s to serve 2364.630 hectares of CCA.
The Ratti distributary, being the smallest in our selection, has the lowest water allowance of 0.039 cumecs/1000 hectares while the other three distributaries have equal water allowance of 0.198 cumecs/1000 hectares. The allocated water is systematically delivered to the field through the outlets, engraved along the entire length of the distributaries, designed to carry only a specific amount of water. The magnitudes of discharge of each outlet in the selected distributaries are presented in
Figure 3.
6. Discussions
The application of this method has the advantage of simplicity and the easiness of replications once the values of variables defined in pricing equation are known for the outlets of a selected distributary. Evidently, the method defines the price of irrigation water as the function of volumetric quantity of water applied to the farm land each year. Therefore, the areas with lower water supply are charged less. For example, the Ratti distributary has a lower water allowance than the other three distributaries; therefore, the proposed prices for Ratti are lower, thus signifying how effectively the logical connection between water pricing and quantity supplied is explained by the proposed model.
The proposed water prices are 5.0%, 7.9% and 7.5% of the value of water in Gilluana, Khairali and Gatti distributaries and 6.0%, 9.7% and 8.0% in Ratti distributary for wheat, sugarcane and rice crops, respectively. The recommended prices are 3 to 9 times higher than the existing water prices against the value of water. Moreover, the deficit between full cost recovery and collection is increasing with the passage of time (see,
Table 4). This difference should be minimized to achieve sustainability, keeping in mind the thin financial conditions of the small farmers which constitute the majority in Punjab’s agriculture and are mostly going to be affected by an increase in water price. One recommended solution is a phasal increase in water cost with initial emphasis on either full cost recovery from the progressive farmers owning large farms or recovering 100% of infrastructure maintenance cost only. However, with the involvement of the majority of the rural work force in the field of agriculture, there are also political reasons for the significant under-charging of canal water. Therefore, the adoption of proposed water prices will be challenging and the implementation needs to be systematic so that the sales and incomes of the farmers are well in line with their logical expectations. There should be a long-term political consensus across the board to implement the plan of full recovery prices. The plan should then be rigorously followed by the elected political administration of the province.
Along with the efforts to put in place a full pricing mechanism, there also needs to be a policy-support mechanism to reduce the O&M cost of irrigation system. For example, the “establishment cost” which is 70% of the total O&M cost (see
Table 4), can be reduced by empowering the farmers through decentralization and involving them in irrigation infrastructure development and maintenance. The most relevant example in this regard is the California State Water Project in which Farmer Organizations (Irrigation Districts) are responsible for overseeing a number of field tasks (e.g., collecting the O&M cost of the irrigation systems) [
6]. The same system, if followed in Punjab, can significantly reduce the “establishment cost”. Another pertinent solution is to create a consensus at the national level on the construction of new reservoirs and developmental projects to line the irrigation channels because increased availability of canal water at the farm-gate will bring down the prices per unit volume of water. Also, the improvement in per hectare productivity, which is presently on the lower side, will reduce the resistance against the full pricing mechanism. The major reason for lower productivity per hectare of average farmers is the shrinking farm size which can be properly addressed by encouraging corporate farming [
58].
Finally, we urge that implementing any newer policy without winning hearts, minds and trust of farmers will be counterproductive. Farming, in general, is becoming more and more challenging with the unpredictable climate and out of all the businesses which are based on agriculture, only farming remains most vulnerable. Farmers know the importance of water in farming business and fully understand the importance of its sustainability. For example, lining of water course project was a massive hit only because of its visible benefits to the farmers. We believe that the farmers should be taught the importance of pricing the irrigation water for the sustainability of an irrigation system before increasing the prices of water. It can be concluded that any system developed for the sustainability of an irrigation system will have the full support of the farming community.