Water Pricing in Agricultural Sector Using Interval Mathematical Programming: The Case Study of Dashtestan

In this study, irrigation water pricing was investigated as a tool for under ground water demand management in Dashtestan district. The data were collected by interviewing pioneer farmers. Applying present worth procedure, the factor cost of each cubic meter of water was obtained to be 84.96 Rials. On the other hand, shadow price of water (i.e. marginal productivity of each cubic meter of water) was obtained in interval [178, 2328] in sparing, [364, 549] in summer and [210, 1802] Rials in fall and winter by Interval Mathematical Programming (IMP). Moreover, water normative demand function for various seasons and years were estimated in order to study water pricing effectiveness. Results indicated that farmers pay much lower than the real value of water in framework of water extraction costs. The results of normative demand function estimation indicated that demand for irrigation water in various seasons is inelastic with respect to water price changing in these seasons and is more inelastic for the years. In fact, farmers react against increasing water price not only as decreasing in consumption at same season, but also with reallocating a part of water in the year. Based on the findings, water pricing policy is not very effectiveness on diminishing consumption of irrigation water.