Thus a principal constraint to the implementation of higher water prices is the poor functioning of many irrigation systems

One of the principal questions about irrigation pricing is: To what degree would farmers alter their behavior if the price of water were significantly higher? Is there empirical evidence that they would take actions to conserve water or to apply it to higher-value crops? Rosegrant et al. have cited evidence, some of it indirect, in Nepal, Tamil Nadu, Jordan and Chile, which strongly indicates that farmers have responded to a higher price or opportunity cost of water by conserving water, improving irrigation efficiencies, and/or shifting their cropping patterns to higher-valued crops when the corresponding product markets are available. The results for the case of Chile are especially clear, after reforms that introduced markets for water:

Reform significantly increased the scarcity value of water, and the area planted to fruits and vegetables, which require less water per value of output than field crops, increased during the period 1975-1982 by 206600 hectares, replacing traditional crops and irrigated pastures. In addition, aggregate water use efficiency in Chilean agriculture increased by an estimated 22-26% between 1976 and 1992. . . .84

By the same token, the opposite result of wasteful use of water, or over-exploitation of aquifers, has been observed in cases in which water is unduly cheap to the user. The case of Yemen, presented in the annex to this book, is only one example.

In summary, it appears clear that irrigation charges generally are very low and that raising them would cause farmers to respond in the desired direction of greater efficiency, as well as generating more fiscal revenues in most cases. Why, then, do the charges remain consistently so low? What kind of policies or institutional arrangements would tend to increase them? Should they be increased in all cases, or are there justifiable exceptions?

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