The Policy of Irrigation Water Pricing in Pakistan: Aims, Assessment and Needed Redirections

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.