International Water Management Institute (IWMI)

This paper introduces a theoretical model to examine farmers’ response to changes in power tariff and water allocation regimes vis-a-vis energy and groundwater use. The author begins by explaining the context as one where the existing direct & indirect regulations and direct management interventions have been ineffective in arresting groundwater depletion. Also, there is an absolute paucity of sufficient empirical data to compare and analyze the differential impacts of different levels of pricing of electricity, and groundwater rights allocations on water and energy productivity.

The paper presents a review of farm sector pricing theories and thereafter analyses the potential impact of different modes of electricity pricing on productivity of groundwater use.

This document by International Water Management Institute (IWMI) highlights the urgent need for improving irrigation systems to enhance food production to meet the needs of the growing population in Asia, in the context of increasing urbanisation and the challenges posed by climate change.

Experience has shown that improvement in irrigation systems have led to improvement in agricultural growth in Asia in the past where irrigated agriculture still continues to be the heart of rural growth.

However, experts estimate that demand for food and animal feed will double during the next fifty years in Asia. This will require better management of the existing irrigated lands as opening up of new alternatives is constrained by lack of land and water resources.

The paper analyzes the potential impacts of energy pricing on efficiency, equity and sustainability in groundwater use. The overall objective of the study is to analyze the socio-economic viability of pro rata pricing of electricity in agriculture. Specific objectives are:

• To study the impact of change in mode of electricity pricing on efficiency and sustainability of groundwater use by well owners
• To analyze the overall impact of electricity pricing on the farming system of well owners, including the economic prospects of farming 
• To analyze the impact of change in mode of electricity pricing on the functioning of water markets