Water Pricing for Agriculture between Cost Recovery and Water Conservation: Where do we Stand in France? - Water and Agriculture: Sustainability, Markets and Policies - page 26

These prices are indexed on price evolution according to an index “p”, representative
of both CACG's (hydraulic works, energy, and wages ) and farmers' (maize and beef
cattle) costs. The nature of this index is the result of a negotiation process between
representatives of the farmers and CACG.

Historical perspective

When looking at the design of the tariff of an irrigated scheme, it's essential to keep
in mind that tariffs — both prices and structure — will evolve greatly over time. In some
cases the evolution could be seen as a cycle beginning with an expanding phase due to the
political will to demonstrate the utility of the large investment that has been made; the
following phase could be a more steady period looking to balance the budget with higher
water prices; and finally a mature system where economic instruments and objectives are
more consistent and negotiated between the different stakeholders. The historical
perspective of the tariffs evolution at BRL (Table 8) provides such an illustration.

Table 8. Historic review of BRL's water pricing policies

Tariffs / prices 1 Period Objectives (1960) Impacts

1960-
1965

Balance fixed costs and
annual revenue.

Binomial (flow and volume)
21Q(l/s) + 0.006V (m3)

Low level of contacts subscription and
unbalanced budget.

1965-
1970

Expand the irrigated
acreage

Block rate decreasing (volume)
V < 1500 m3/ha : 0.02V (m3)
V< 3000 m3/ha : 0.01V (m3)
V> 3000:ha : 0.008V (m3).

High increase in irrigated acreage,
Earnings highly dependent on climatic
conditions.
Difficulties in controlling the real irrigated
acreage of farmers.

1970-
1993

Balance the budget
even in wet years.

Binomial (flow and volume) +
free allowance (300 m3 /l/s)
45 Q(l/s) + 0.05V (m3)

Robust system.
Budget more and more unbalanced due
to the index formula for price revision
don't depend on BRL costs.

1993-
2004

Balance the budget and
protect against prices
evolution.

Binomial (flow and volume)
45Q(l/s) + 0.06V (m3)

Due to high water prices, irrigated maize
disappears in the scheme.

All prices of this table are derived from French Francs from year 1960 with a change rate of 1 euro = 6.567 FRF.
Source : BRL, 2004.

Conclusions

Pricing experiences in France are first oriented towards cost recovery objectives and
have contributed to the reduction of public financing at least with respect to operation and
maintenance costs for irrigation schemes. In addition a part of the capital cost, ranging
from 60 per cent to 15 per cent is charged to farmers. Is this cost recovery “adequate”?
This has to be restudied with the implementation of the European Water Framework
Directive and the new Common Agricultural Policy in order to ensure the sustainability
of water infrastructures. Consequently, a large part of water companies' and water users'
water pricing systems avoid any waste of water. This characteristic is reinforced by the
fact that a lot of them have volumetric or other variable rate systems.