Water scarcity, pricing mechanism and institutional reform in northern China irrigated agriculture

Abstract

With water scarcity becoming an increasing constraint to food production in northern China, pricing mechanism has been given a high priority in dealing with the problem. Using selected irrigation districts in northern China as a case study, this paper probes the effectiveness of pricing-based water policies in addressing challenges facing irrigated agriculture under China’s current water management institutions. The examination shows that the rapid increase in irrigation cost during the past decade has failed to generate a force for water conservation. Over-exploitation of groundwater resources has even intensified with the shift to higher value-added but often more water intensive crops. Based on a normative analysis of water demand curves, the logic behind the reluctance for water authorities and farmers to conserve water is elaborated. The result suggests that pricing irrigation alone is not a valid means of encouraging water conservation under the current irrigation management institutions. Clearly defined and legally enforceable water rights and responsibilities for water operators and users in the irrigation system are the foundation underlying the incentives for conserving water and improving the irrigation efficiency.