Water Pricing for Agriculture between Cost Recovery and Water Conservation: Where do we Stand in France? - Water and Agriculture: Sustainability, Markets and Policies - page 24

In these conditions and when water valuation among farmers is more heterogeneous,
a menu of optional tariffs can be proposed to users in order that the rent extracted by the
manager from users could be maximised (Chohin, et al. ii). Farmers with low water
elasticity of demand to price will be offered a higher price, and inversely. This type of
pricing is intended to increase the manager's revenue and to ensure that the various users
have an adapted quality of service. This situation can be illustrated through the case of
BRL.
BRL — company for the development of the Languedoc Roussillon Region, (South-
East of France) — is a Regional development Company (SAR), i.e., a commercial
company with a majority of public shareholders, run under the special control of the
Agriculture Department. Due to the objective to promote regional development, large
hydraulic works have been built and are now largely oversized compared to the present
water demand (Nicol, 2001). When farmers want to irrigate, they apply for a water
contract and have to choose among different tariffs (Table 6) that are roughly of the two
following types:

Tariff “Pro”: This tariff is aimed at farmers who practice each year a regular irrigation
on crops like orchards and vegetables. Tariffs are binomial with (i) a fixed part based on
the subscribed flow, that is the maximum instantaneous flow the farmer is allowed to
use. This flow is chosen by the farmer according to the characteristics of the plots,
cropping pattern and irrigation equipment, and (ii) a proportional part, based on the
water volume.

Tariff “Appoint”: Supplemental tariffs are aimed at farmers who don't need much water
and sometimes not every year. It is well suited for vineyards and some cereals like
durum wheat, which is a drought-resistant crop. The fixed part is lower than for regular
irrigation and the proportional part higher, so that if the farmer uses a greater water
volume, they will be introduced to an incentive to turn to a regular irrigation contract.

Table 6. BRL optional water pricing

Tarif “Pro” Tarif “Appoint”

Basis Subscribed flow (m3/h) Volume (m3)

Fixed part ( ￿ ￿ 54 36

Variable part ( 0.076 0.184

Source : BRL, 2001.

Furthermore, the subscription fee, the fixed part of the tariff, varies according to the
duration of the contract (1 year versus 5 years), as an incentive to long-term contracts that
secure the manager's revenue. At the same time, farmers with vineyards are reluctant to
sign long-term contracts because of their low and variable water use. All these prices are
indexed on price evolution according to an index representative of BRL's costs (mainly
hydraulic work operations, energy and wages).
So BRL has not faced any water resources concern during recent droughts and its
water pricing system is not designed to promote water savings, although the volume
charge is an incentive to avoid any waste of water. Due to concerns of balancing its
budget, BRL has proposed contracts that are more closely adapted to different situations
and farmer strategies.