Pakistan operates the world's largest well-articulated
irrigation system. Individual farms receive water from the gravity flow
of a massive network of canals, distributaries and watercourses fed by
the Indus River and its tributaries. In recent years public tubewells
have become an additional, though somewhat limited, source of irrigation
water. The canal system, which has been in operation for more than 100
years, is believed to have become too obsolete to cater for the needs of
modern agriculture and is, therefore, in desperate need for
rehabilitation. But resource-poor Pakistan cannot undertake the
rehabilitation work on its own, and must depend on foreign loans or at
least ensure full recovery of annual operation and maintenance (0 and M)
expenditures [Chaudhry (1985); Duane (1975) and Hotes (1984)]. Apart
from generating investment funds, the cost recovery, with higher water
charges, would also lead to greater water-use efficiency and an
equitable income distribution at the farm level [Chaudhry (1985) and
Hotes (1984»). Can this all be accomplished by simply raising water
charges? In this paper, we have attempted to answer this question. To
answer the question systematically, we have divided the paper in five
sections. The current state of Pakistan's irrigation system, water
charges and cost recovery is discussed in Section 2. Section 3 deals
with possible impact of rising water charges on cost recovery,
investments, efficiency of water use and income distribution under the
current system of water pricing. Section 4 presents policy alternatives
that would ensure an effective cost recoyery, greater water-use
efficiency and a more equitable distribution of farm income. Section 5
presents the summary and conclusions of the paper.
Evaluating the Performance of Alternative Municipal Water Tariff Designs: Quantifying the Tradeoffs between Equity, Economic Efficiency, and Cost Recovery
