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Economics Of Water Productivity In Managing Water For Agriculture.

R. Barker, D. Dawe, A. Inocencio

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This paper discusses some of the concepts and complexities in economic analyses related to increasing water productivity, provides some examples and determines what it implies regarding the potential for increasing water productivity. The chapter is divided into three main sections. The first section discusses the relationship between efficiency, productivity and sustainability, and emphasizes the confusion in definitions. The second section provides examples at plant, farm, system and basin levels, relating water productivity to both economic efficiency and sustainability. The third section discusses the potentials for increases in water productivity and economic efficiency through incentives created by policy and institutional reforms. Failure to include the potential for recycling or reuse of water diverted for irrigation in the measurement of irrigation efficiency has led to the widely accepted view that public irrigation systems are poorly managed and that there is considerable scope for increasing water productivity. Water savings do not necessarily lead to higher water productivity and, similarly, higher water productivity does not lead to greater economic efficiency. A distinction can be made between those measures that increase water productivity by increasing crop yield for a given evapotranspiration (ET) or diversion as opposed to reducing the water-diversion requirements. Measures to increase crop yield for a given ET translate into water-productivity gains at the system and basin levels. However, the management of water to reduce water-diversion requirements is riddled with off-site effects and externalities. Thus, whether water-management practices or technologies designed to increase water productivity and economic efficiency at the farm level translate into water-productivity and economic-efficiency gains at the system or basin level needs to be determined. The basin is a hydrological unit as opposed to an administrative unit. It is only at this level that we can capture and include in our analysis the off-site effects or externalities (e.g. the case of Gal Oya, Sri Lanka). The growing scarcity and rising value of water in a basin induce farmers to seek ways to increase water productivity and economic efficiency (e.g. the basin cases in Turkey, Thailand and Mexico). Recycling or reuse of water is prominent among the practices adopted to increase water productivity, and greater attention needs to be focused on managing surface water and groundwater for conjunctive use. We need a better understanding of biophysical and socio-economic changes in basins over time and improved measures of basin-level efficiencies before we can determine in a given situation the potential for increasing water productivity through policy and institutional reforms. Finally, as basins become closed, overexploitation of groundwater resources is accompanied by a serious decline in water quality and other problems of environmental degradation. Decisions on basin-level allocations among sectors cannot be based strictly on economic efficiency but they must involve value judgements as to how best to benefit society as a whole. This will include setting priorities in the management of water resources to meet objectives such as ensuring sustainability, meeting food-security needs and providing the poorer segments of society with access to water.