Pricing publicly-provided irrigation water at its scarcity value is desirable for both efficiency of usage and fiscal recovery, but paradoxically is least feasible in regions of water scarcity. This paper presents a case study of Karnataka state in India to argue that, given the rent-seeking possibilities in crop-specific water rates and the infeasibility of metering in the developing country context, a flat quantum of water entitlement per net hectare of command area, with an accompanying fixed charge per net hectare is best. Such a flat entitlement is crop-neutral and de-links quantum of use from the price, which can then be set at a (moving) compliance-maximising rate. Even if the implicit rate charged per unit of water is below scarcity value, so that irrigation remains publicly subsidised, it would not thereby be inefficiently allocated. Local user groups may be the best mechanism for enforcing the flat entitlement and could oversee any informal water trading that might develop.

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