The Effects of Competition Between Agriculture and Urban Sector on the economic value of groundwater resources

The growing population and rising incomes have increased the water demand for agricultural, industrial and urban use.  On the other hand, water supply has shifted from surface sources to groundwater sources. This has significantly reduced the storage of groundwater resources. The growth of urbanization and the existence of two cities of Tehran and Karaj in the Tehran-Karaj plain has increased the demand for water in the domestic sector and as a result has reduced the share of water consumption in the agricultural sector. For optimal water management with considering the water demand in different economic sectors, in this study, the effects of changes in water demand in the domestic sector on agricultural activities, its economic value have been estimated.  The Stone-Geary Utility method was used to estimate urban water demand and the positive mathematical programming approach was used to estimate the economic value and effects of urban water demand on the agricultural sector. The results showed that the water economic value in the agricultural sector is equal to 550 Toman per cubic meter. Now, if the share of the agricultural sector in groundwater decreases by 1, 5, 10 and 20%, the economic value of water in the agricultural sector will increase to 600, 703, 761 and 976 Toman per cubic meter. Due to the constraints created by water demand in the domestic sector and the reduction of water availability, in addition to pricing based on the economic value of water in the agricultural sector, policymakers are proposing incentive policies to invest in modern irrigation systems in order to increase more water productivity