Agriculture Reference
In-Depth Information
What is more interesting is the way this economic analysis is used: this tarification is
considered as a reference for negotiation by the stakeholders. For each use, the output is a
price defined as a rate applied to the long-term marginal cost. Social considerations and
the economic situation forecast for the next period are main arguments in the negotiation
process.
Table 5. SCP water tariffs
Upstream command
area
Intermediate command
area
Coastal command
area
Fixed part (
14
12
9
Variable part (
0.09
0.07
0.04
Source
: Association Française d'Étude des Irrigations et du Drainage, 2001.
For all uses except irrigation, pricing is trinomial with (i) a fixed part depending on
the maximum subscribed flow, (ii) a volumetric part depending both on the consumption
in the peak period (4 months in the summer period) and outside the peak period. For
irrigation, this mainly occurs in summer, and the water pricing is, as a consequence,
binomial. Some specific tariffs are offered for protection against frost, or when SCP has
to deliver water at a higher pressure than the nominal one.
Demand
Price sensitivity and the demand for agricultural water
Water pricing will not always be a sufficient incentive for users to enhance water use
efficiency. This is the case when price elasticity for water demand is close to nil,
e.g., when the water bill accounts for only a small proportion of the farmers' total
production costs or income; when alternative ways of growing crops or water resources
are not available, due to technical, social or economic constraints; or when the bulk of the
total water charge consists of fixed costs. Beyond these factors influencing the sensitivity
of demand for water which have been well documented in the literature, we come back to
the trade-off position where farmers are faced with the decision to irrigate or not. Three
levels of decision-making can be distinguished:
1.
The decision to invest in irrigation equipment and to have access to water resources.
This is a medium-term decision between rainfed and irrigated agriculture.
2.
The choice of an irrigation cropping pattern with more or less irrigated crops or with
crops that consume more or less water. Except in perennial crops like orchards, this is a
yearly decision.
3.
The choice of irrigation practices: irrigation scheduling and level of restriction for
different crops. This is a very short term decision.
The resulting elasticity of water demand depends on the elasticity at each level and is
derived from the rigidity of the farming systems that are directly linked to structural
constraints, such as the financial potential and the time horizon that is to be considered by
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