Serious constraints in increasing water supply have led countries around the world to seek solutions for managing water demand. Proper pricing of water is one of the foremost water demand management policies which can lead to the optimal water use. On the flip side, the quality of agricultural water is declining due to the uncontrolled abstraction of groundwater. In this regard, the present study aims to determine the economic value of different qualities of water throughout pistachio-growing regions of the Rafsanjan-Anar plain in Iran. Results reveal that the economic value and price elasticity of water demand differ among different groups. Freshwater, moderately saline water and highly saline water have the highest to lowest elasticity and shadow price, respectively. Additionally, comparison of the gross margin, which represents the profit from each activity, in two conditions including the unsustainable status quo and sustainable conditions intended by the Ministry of Energy, shows that although water use has declined by 50%, the gross margin has decreased by only 36%. This implies it is feasible to reduce water use in pistachio orchards by water re-allocation with a minimum decline in profit, which will both reduce water use and ensure high economic benefits for farmers.

  • The decline of water quality in many parts of the world has made water resource management a critical policy.

  • In our study, different pricing policies are proposed for different water qualities so as to manage the demand for irrigation water.

  • The water pricing policy will be accomplished successfully if it is intended to reduce the consumption of high-quality water resources.

Graphical Abstract

Graphical Abstract
Graphical Abstract

Nowadays, water and food supply are among the basic needs of human societies, although improving living standards and protecting the environment are also of great significance. In addition to increasing population growth, factors such as the deterioration of natural resources, unplanned abstraction of groundwater resources, expansion of saline lands and contamination of surface and groundwater resources have intensified the water and soil resource limitations (Nazemi, 2000).

Declining water quality and expanded awareness of water-related natural and social issues clarify why water resource administration has turned into a basic approach issue in numerous parts of the world (Tsur, 2004, 2005).

Management of water demand is one of the key issues in the management and utilization of water resources, in addition to its supply organization. This is of great importance because poor irrigation water management gives rise to a noteworthy increase in water demand and wastage of this scarce resource. There are various tools for implementing water demand management policies, including the re-allocation of water resources, improving the infrastructure, introducing the water market and pricing of water in the agricultural sector (Dinar et al., 1997; Chakravorty & Zilberman, 2000; Gomez-Limon & Riesgo, 2004) which could work for distributing water among demandants commensurate with the benefit or value of the final product and could motivate users to conserve water (Easter et al., 1999; Cortignani & Severini, 2009; Medellín-Azuara et al., 2012; Dinar et al., 2015; Bierkens et al., 2019; Sapino et al., 2020). Low water price may increase water consumption and encourage wasteful use, depriving other farmers and consumers. Conversely, if the price of water exceeds the output value of the crop, farmers tend to no longer exploit it; such a price for water negates the objectives of agricultural growth and increment in the income of farmers (Easter et al., 1999; Bierkens et al., 2019). Therefore, it is imperative that water users consider the actual cost of water when deciding on water demand and allocation of water between different activities. ‘An obvious way to achieve this is to charge water users the “right” price of water’ (Tsur, 2004, 2005). The pricing policies in managing water resources can promote its conservancy and sustainability, and water consumption will be optimized among consumers if the price of water resources is determined by considering the net value of water and the cost of its supply (Rogers et al., 2002).

Water pricing is considered an effective and significant economic tool for achieving more efficient water use, in which users are made aware that water is a resource that can be scarce and that protecting water quality and ensuring water availability have their own costs (Dinar & Mody, 2004; Chebil et al., 2010; Bogaert, 2012). Moreover, knowing the economic value of water and its price elasticity could help policymakers design water policies that promote more efficient use of this scarce resource (Vásquez-Lavín et al., 2020).

Given the importance of using pricing tools to achieve a balance in the use of water resources, the present study evaluated the possibility of using this tool to achieve sustainable development. In this regard, this possibility should be investigated so carefully because a major problem in water management is that water prices are socially constructed to a large extent, rather than being based on the principles of efficient water pricing that reflect resource scarcity. In many areas, water resource management is highly political and increasing water prices tends to be a sensitive and complicated policy matter (Olmstead, 2010; Kejser, 2016).

Considering the importance of water pricing in achieving sustainable development, as well as the various political, social and economic consequences of this issue, the present study attempted to estimate a general perspective into the volume of water price changes to achieve the desired goals of the Ministry of Energy. Such estimation helps policymakers and planners to be more careful in selecting the appropriate tools and policies for achieving their goals.

Studies in developing countries suggest that water pricing is helpful in demand management policies to control the consumption of water resources (Ahmad et al., 2017). Water users in these countries pay for only 29% of total cost and the main objectives of the pricing system are to develop equality in water distribution and efficiency in irrigation (Seagraves & Easter, 1983). Moreover, a number of studies in India demonstrate that the appropriate electricity tariff policy and electricity replacement with direct benefit transfer to farmers could help maintain the income without overexploiting water resources (Fosli et al., 2021; Parween et al., 2021). Also, the treatment of water resources and its services, and property rights have a significant impact on pricing and costs, including service, resources and environment, which are difficult to recover (Shen & Reddy, 2016).

Due to the climatic conditions of the Rafsanjan-Anar plain and the low quality and quantity of water in the region and the impossibility of economic cultivation of other crops, the predominant product of this plain is pistachio and pistachio cultivation in this region has economic and logical justification. One of the limitations of the paper is the small scope of product selection. Also, due to the fact that this plain is a single product, we could not expand the scope to overcome this limitation in linear programming. We divided pistachio production into several activities which included the amount of water consumption in different ranges, water quality in different ranges, soil texture and pistachio cultivar to be able to use the linear programming model.

Pistachio is one of the main export commodities in Iran and constitutes 71% of the export value of farming products, 47% of the export value of the agricultural sector and 11% of non-oil export. This product, which earns more than $900,000,000 for the country (Clearance, 2019; FAO, 2019), is mainly produced in Rafsanjan and Anar, Kerman Province, Iran, with a cultivated area of more than 100,000 ha. The shares of these cities in terms of the fertile cultivated area for pistachio are 24, 34 and 60% in the world, Iran and Kerman Province, respectively (Iran Agricultural Statistics, 2021).

Pistachio is a drought-tolerant and profitable product; therefore, it is considered as the final agricultural option in many parts of Iran and the world. In other words, pistachio cultivation becomes popular when there is no possibility for growing any other products, economically and technically. Even when the water quality is low and drainage depth is high, profit gained from planting pistachio exceeds the cost of water extraction. Thus, destruction of water resources is indispensable. In the past, pistachio was planted in a limited number of regions in Iran and the globe. However, due to the reduced water quality and quantity as well as lack of cost-effectiveness in terms of producing other agricultural products, pistachio is currently cultivated in 27 of 31 provinces of Iran (Iran Agricultural Statistics, 2021). In the USA, there was no export of pistachio until 1981; however, it has transformed into the leading pistachio exporter in the world at present. Moreover, pistachio cultivation has been expanded in numerous countries such as, China, Turkey, Syria, Greece, Italy, Afghanistan, Tunisia, Spain, India, Turkmenistan, Uzbekistan, Chile, etc. (FAO, 2020). Although the current study is done in a small geographical area, its results could be used in the areas that enjoy an appropriate climate for pistachio cultivation.

As stated, many studies have been carried out on water pricing; nevertheless, different pricing policies have been suggested in a few studies for different qualities of water. In the current study, different prices are proposed for different water quality levels (fresh water, moderately saline water and highly saline water), recruiting a mathematical programming method and considering four electrical conductivity (EC) constraints, the amount of water consumption, soil texture and the type of pistachio. (It is worth noting that the measurement of EC of water was conducted in the Rafsanjan Pistachio Research Institute.)

The rest of this paper is organized as follows. First, we calculated the pistachio cultivation optimal model and maximized objective function in the current unsustainable and the desired sustainable conditions. Next, we estimated water shadow prices for different qualities of water. Afterwards, we assessed the ability to pay for water to different size classes of farmers. Then, to examine the effectiveness of pricing, we estimated the water normative demand function and demand price elasticity. Afterwards, data and empirical results were analyzed. The last section is devoted to the conclusion and recommendations.

Iran, with an area of 1,648,195 km2 and a population of 80 million people, is located in the Middle East in the southwest of Asia. This country is divided into 31 provinces of which Kerman in the southeast is the largest, covering an area of 183,285 km2. The Rafsanjan-Anar plain is located in the north of Kerman province. Due to the warm and dry climatic conditions as well as low quality and quantity of water, pistachio is the only agricultural crop that is presently cultivated in this plain. Kerman province is the world's largest producer of pistachio with an average of 129 mm annual amount of water, and more than 212,000 ha of pistachio (Iran Agricultural Statistics, 2021). In addition, the Rafsanjan-Anar plain is one of the most prominent areas of pistachio cultivation, known as the cradle of pistachio. Figure 1 shows the location of the study area.

Fig. 1

The location of the study area.

Fig. 1

The location of the study area.

Close modal

Although increasing the cultivated area of pistachio in Iran has boosted economic growth, exports and currency import, it has triggered some instability in the abstraction of water resources, in such a way that the unsustainable use of water resources has resulted in reducing water quality in the region in addition to the drop in the groundwater table. The minimum and maximum salinity levels in the Rafsanjan-Anar plain are 1,100 and 19,000 μmho/cm, respectively (Iranian Pistachio Research Center, 2019). According to the data reported by Kerman province Regional Water Company, 540 million m3 of water is currently abstracted from underground aquifers in the Rafsanjan-Anar plain. However, the annual water withdrawal equilibrium in this plain is 270 million m3/year based on the reports of the same company. In other words, it is necessary to reduce water exploitation from the agricultural wells of the region by half to have sustainable water withdrawal of these resources. In this regard, the Ministry of Energy designed a scheme called Water Equilibrium Scheme, in which the withdrawal of these resources should achieve a sustainable level at the end of the project.

In this study, the optimal cultivation model and shadow prices for different qualities of water were calculated using the linear programming method. Moreover, by plotting the normative water demand function, the rate of increase in water prices was calculated to achieve a sustainable withdrawal of water resources in the study area.

The methodology was based on the mathematical programming technique in which profits from agricultural production are maximized under conditions constrained by the availability of water and land. Gross margin represents the profit from each activity (Rial/ha) which is calculated by multiplying the price of the product by its yield minus variable costs other than the cost of water supply. The mathematical forms of the objective function with maximizing gross margin and constraints are provided as follows:
formula
(1)

To calculate the annual amount of water per hectare of pistachio orchards, the number of orchard irrigation hours per year was multiplied by the well discharge rate and number 3.6. The calculated value was estimated in The net profit per hectare was calculated after deducing all production costs from income. The income was calculated according to pistachio yield (kg/ha) and the pistachio price (Rial). Since Ahmad Aghaei, Akbari, Kaleh Quchi and Ohadi are currently being produced in the region, these four pistachio cultivars were used in the present work. Based on the statistical results obtained at the Pistachio Research Institute, two cultivars of Ahmad Aghaei and Akbari were placed in one group and two cultivars of Kaleh Quchi and Ohadi were placed in the second group. To estimate the normative demand function of water, the water costs were separated from other production costs, as presented in Table 1. The soil texture of pistachio orchards was divided into three groups including light, medium and heavy. Due to the similar yield, pistachio orchards with light and medium soils were classified in one group and heavy soil texture was placed in another due to its significantly lower yield. Finally, according to Pistachio Research Institute's recommendations, water quality was divided into three EC groups of less than 8,000; 8,000–12,000 and more than 12,000 μmho/cm. Also, water consumption was divided into three groups of less than 6,000; 6,000–12,000 and more than 12,000 m3/ha. Accordingly, we examined 36 activities.

Table 1

Definitions of variables.

VariablesExplanationVariablesExplanation
z Total gross margin (Rialaj Water consumption ( 
 The profit from one hectare of each activity before deducting the cost of water (Rial) K Pistachio cultivar 
P The cost of pumping water  V Soil texture 
 Water consumption per activity ( bi Maximum available water with different salinities 
 The cultivated area of each activity (ha) bk The maximum cultivated acreage of different cultivars (Ahmad Aghaei, Akbari, Kaleh Quchi and Ohadi) 
i Water salinity (μmho/cm) bv The maximum cultivated area of gardens with light, medium and heavy soil textures 
VariablesExplanationVariablesExplanation
z Total gross margin (Rialaj Water consumption ( 
 The profit from one hectare of each activity before deducting the cost of water (Rial) K Pistachio cultivar 
P The cost of pumping water  V Soil texture 
 Water consumption per activity ( bi Maximum available water with different salinities 
 The cultivated area of each activity (ha) bk The maximum cultivated acreage of different cultivars (Ahmad Aghaei, Akbari, Kaleh Quchi and Ohadi) 
i Water salinity (μmho/cm) bv The maximum cultivated area of gardens with light, medium and heavy soil textures 

aRials is the currency of Iran (1 USD=240,000 Rials).

The required data included the amount of inputs used in pistachio production per hectare (cultivated area, labor (person/day), machinery (h), animal manure (kg), fertilizer (kg), pesticide (l) and water (m3)), their cost (Rial/m3), pistachio yield (kg/ha) and pistachio price (Rial). In total, 286 pistachio farmers in the Rafsanjan-Anar plain were randomly selected to complete a questionnaire by the Rafsanjan Pistachio Research Institute during the crop year 2018–2019. Excel software was used to estimate the models.

As mentioned earlier, 36 variables are applied in the current study; the variables and some of their features are demonstrated in Table 2.

Table 2

Variables and relevant features.

VariablesWater qualityWater consumption (m3/ha)Pistachio cultivarSoil textureRelative share of water (%)Average yield (kg/ha)
 EC<8,000 <6,000 Akbari and Ahmad Aghaei Light and medium 3.7 824 
 EC<8,000 <6,000 Akbari and Ahmad Aghaei Heavy 0.7 253 
 EC<8,000 <6,000 Kaleh Quchi and Ohadi Light and medium 4.2 624 
 EC<8,000 <6,000 Kaleh Quchi and Ohadi Heavy 0.9 561 
 EC<8,000 6,000–12,000 Akbari and Ahmad Aghaei Light and medium 8.4 627 
 EC<8,000 6,000–12,000 Akbari and Ahmad Aghaei Heavy 1.7 543 
 EC<8,000 6,000–12,000 Kaleh Quchi and Ohadi Light and medium 16.1 645 
 EC<8,000 6,000–12,000 Kaleh Quchi and Ohadi Heavy 4.9 594 
 EC<8,000 >12,000 Akbari and Ahmad Aghaei Light and medium 8.2 1,356 
 EC<8,000 >12,000 Akbari and Ahmad Aghaei Heavy 1.4 539 
 EC<8,000 >12,000 Kaleh Quchi and Ohadi Light and medium 12.4 1,100 
 EC<8,000 >12,000 Kaleh Quchi and Ohadi Heavy 7.2 461 
 8,000<EC<12,000 <6,000 Akbari and Ahmad Aghaei Light and medium 0.1 324 
 8,000<EC<12,000 <6,000 Akbari and Ahmad Aghaei Heavy 0.1 267 
 8,000<EC<12,000 <6,000 Kaleh Quchi and Ohadi Light and medium 0.2 324 
 8,000<EC<12,000 <6,000 Kaleh Quchi and Ohadi Heavy 0.1 194 
 8,000<EC<12,000 6,000–12,000 Akbari and Ahmad Aghaei Light and medium 0.8 589 
 8,000<EC<12,000 6,000–12,000 Akbari and Ahmad Aghaei Heavy 1,802 
 8,000<EC<12,000 6,000–12,000 Kaleh Quchi and Ohadi Light and medium 1.9 467 
 8,000<EC<12,000 6,000–12,000 Kaleh Quchi and Ohadi Heavy 0.8 139 
 8,000<EC<12,000 >12,000 Akbari and Ahmad Aghaei Light and medium 3.9 1,040 
 8,000<EC<12,000 >12,000 Akbari and Ahmad Aghaei Heavy 1.6 1,140 
 8,000<EC<12,000 >12,000 Kaleh Quchi and Ohadi Light and medium 8.4 866 
 8,000<EC<12,000 >12,000 Kaleh Quchi and Ohadi Heavy 1.4 1,680 
 EC>12,000 <6,000 Akbari and Ahmad Aghaei light and medium 0.3 326 
 EC>12,000 <6,000 Akbari and Ahmad Aghaei heavy 0.1 326 
 EC>12,000 <6,000 Kaleh Quchi and Ohadi Light and medium 0.2 326 
 EC>12,000 <6,000 Kaleh Quchi and Ohadi Heavy 0.4 290 
 EC>12,000 6,000–12,000 Akbari and Ahmad Aghaei Light and medium 1.9 807 
 EC>12,000 6,000–12,000 Akbari and Ahmad Aghaei Heavy 0.2 286 
 EC>12,000 6,000–12,000 Kaleh Quchi and Ohadi Light and medium 4.2 852 
 EC>12,000 6,000–12,000 Kaleh Quchi and Ohadi Heavy 0.2 286 
 EC>12,000 >12,000 Akbari and Ahmad Aghaei Light and medium 1.1 1,021 
 EC>12,000 >12,000 Akbari and Ahmad Aghaei Heavy 0.1 750 
 EC>12,000 >12,000 Kaleh Quchi and Ohadi Light and medium 1.1 357 
 EC>12,000 >12,000 Kaleh Quchi and Ohadi Heavy 0.1 286 
VariablesWater qualityWater consumption (m3/ha)Pistachio cultivarSoil textureRelative share of water (%)Average yield (kg/ha)
 EC<8,000 <6,000 Akbari and Ahmad Aghaei Light and medium 3.7 824 
 EC<8,000 <6,000 Akbari and Ahmad Aghaei Heavy 0.7 253 
 EC<8,000 <6,000 Kaleh Quchi and Ohadi Light and medium 4.2 624 
 EC<8,000 <6,000 Kaleh Quchi and Ohadi Heavy 0.9 561 
 EC<8,000 6,000–12,000 Akbari and Ahmad Aghaei Light and medium 8.4 627 
 EC<8,000 6,000–12,000 Akbari and Ahmad Aghaei Heavy 1.7 543 
 EC<8,000 6,000–12,000 Kaleh Quchi and Ohadi Light and medium 16.1 645 
 EC<8,000 6,000–12,000 Kaleh Quchi and Ohadi Heavy 4.9 594 
 EC<8,000 >12,000 Akbari and Ahmad Aghaei Light and medium 8.2 1,356 
 EC<8,000 >12,000 Akbari and Ahmad Aghaei Heavy 1.4 539 
 EC<8,000 >12,000 Kaleh Quchi and Ohadi Light and medium 12.4 1,100 
 EC<8,000 >12,000 Kaleh Quchi and Ohadi Heavy 7.2 461 
 8,000<EC<12,000 <6,000 Akbari and Ahmad Aghaei Light and medium 0.1 324 
 8,000<EC<12,000 <6,000 Akbari and Ahmad Aghaei Heavy 0.1 267 
 8,000<EC<12,000 <6,000 Kaleh Quchi and Ohadi Light and medium 0.2 324 
 8,000<EC<12,000 <6,000 Kaleh Quchi and Ohadi Heavy 0.1 194 
 8,000<EC<12,000 6,000–12,000 Akbari and Ahmad Aghaei Light and medium 0.8 589 
 8,000<EC<12,000 6,000–12,000 Akbari and Ahmad Aghaei Heavy 1,802 
 8,000<EC<12,000 6,000–12,000 Kaleh Quchi and Ohadi Light and medium 1.9 467 
 8,000<EC<12,000 6,000–12,000 Kaleh Quchi and Ohadi Heavy 0.8 139 
 8,000<EC<12,000 >12,000 Akbari and Ahmad Aghaei Light and medium 3.9 1,040 
 8,000<EC<12,000 >12,000 Akbari and Ahmad Aghaei Heavy 1.6 1,140 
 8,000<EC<12,000 >12,000 Kaleh Quchi and Ohadi Light and medium 8.4 866 
 8,000<EC<12,000 >12,000 Kaleh Quchi and Ohadi Heavy 1.4 1,680 
 EC>12,000 <6,000 Akbari and Ahmad Aghaei light and medium 0.3 326 
 EC>12,000 <6,000 Akbari and Ahmad Aghaei heavy 0.1 326 
 EC>12,000 <6,000 Kaleh Quchi and Ohadi Light and medium 0.2 326 
 EC>12,000 <6,000 Kaleh Quchi and Ohadi Heavy 0.4 290 
 EC>12,000 6,000–12,000 Akbari and Ahmad Aghaei Light and medium 1.9 807 
 EC>12,000 6,000–12,000 Akbari and Ahmad Aghaei Heavy 0.2 286 
 EC>12,000 6,000–12,000 Kaleh Quchi and Ohadi Light and medium 4.2 852 
 EC>12,000 6,000–12,000 Kaleh Quchi and Ohadi Heavy 0.2 286 
 EC>12,000 >12,000 Akbari and Ahmad Aghaei Light and medium 1.1 1,021 
 EC>12,000 >12,000 Akbari and Ahmad Aghaei Heavy 0.1 750 
 EC>12,000 >12,000 Kaleh Quchi and Ohadi Light and medium 1.1 357 
 EC>12,000 >12,000 Kaleh Quchi and Ohadi Heavy 0.1 286 

According to the results in Table 2, 69.8% of water used by farmers is obtained from fresh water (EC < 8,000), 20.3% from fairly saline water (8,000 < EC < 12,000) and 9.9% from extremely saline water. Based on another classification, 35.3% of consumed water is used for Akbari and Ahmad Aghaei cultivars and 64.7% for Kale Quchi and Ohadi cultivars. Water share is the same for the currently stable and unstable conditions. In fact, as long as water's shadow price is higher than the water price, there would be no change in water consumption share for different activities. As shown in Table 3, the pistachio cultivation optimal model and maximized objective function was compared in the currently unsustainable and desired sustainable conditions of the Ministry of Energy.

Table 3

Comparing the pistachio cultivation and maximized objective function in the currently unsustainable and desired sustainable conditions.

Activity (ha) (ha) (ha) (ha) (ha)Maximized objective function (Rial)
Unsustainable conditions 3,270 41,057 28,215 6,100 4,515 111,155,277,881,759 
Sustainable conditions 3,270 18,731 14,108 3,050 18,622 71,087,912,253,267 
Activity (ha) (ha) (ha) (ha) (ha)Maximized objective function (Rial)
Unsustainable conditions 3,270 41,057 28,215 6,100 4,515 111,155,277,881,759 
Sustainable conditions 3,270 18,731 14,108 3,050 18,622 71,087,912,253,267 

Results of the pistachio cultivation optimal model in the currently unstable conditions are as follows: 3,270 ha ; 41,057 ha ; 28,215 ha x2212; 6,100 ha x3221 and 4,515 ha x3312. Also, results of pistachio cultivation optimal model in stable conditions are as follows: 3,270 ha x1111; 18,731 ha x1121; 14,108 ha x2212; 3,050 ha x3221 and 18,622 ha x3312. Here, indicates the under-cultivation area with EC of less than 8,000 μmho/cm, water consumption of less than 6,000 m3/ha, as well as Akbari and Ahmad Aghaei cultivars, and light and medium soil texture. represents the under-cultivation area with EC of less than 8,000 μmho/cm, water consumption of less than 6,000 m3/ha ,Kaleh Quchi and Ohadi cultivars as well as light and medium soil texture. designates the under-cultivation area with EC of 8,000–12,000 μmho/cm, water consumption of 6,000–12,000 m3/ha, Akbari and Ahmad Aghaei cultivars as well as heavy soil texture. exhibits the under-cultivation area with EC of more than 12,000 μmho/cm, water consumption of 6,000–12,000 m3/ha, Kaleh Quchi and Ohadi cultivars as well as light and medium soil textures. Subsequently, shows the under-cultivation area with the EC of greater than 12,000 μmho/cm, water consumption of more than 12,000 m3/ha, Akbari and Ahmad Aghaei cultivars as well as heavy soil texture.

Due to the unsustainable water abstraction from underground aquifers in the pistachio-producing areas of Iran, especially in Kerman province, the Iranian government has decided to implement a water equilibrium plan in these areas. Since about 95% of the water abstracted from underground aquifers is used in the Rafsanjan-Anar plain in Kerman province, this study aimed to investigate the feasibility of implementing the water equilibrium plan and its consequences in this area, employing linear programming and water pricing policy. With respect to the objectives of this plan, the amount of water withdrawal from underground resources in these two counties should be reduced from the annual rate of 540–270 million m3/year.

Comparing the maximized objective function (gross margin) in both current and equilibrium conditions indicated that the optimal objective value only decreased by 36% although water consumption decreased by 50%, indicating that water consumption can be decreased by re-allocating water in pistachio orchards with the minimum reduction in activity efficiency, which is possible by removing low-quality orchards and retaining high-yield pistachio orchards. This will both reduce water consumption and abstraction and ensure high economic benefits for farmers. Therefore, we will achieve the following two goals: first, sustainable water level (we will achieve from unsustainable water use to sustainable water use) and second, optimal allocation of water resources.

After determining the optimal cultivation model and maximized objective function, water consumption was calculated in two conditions. First, the current water consumption was determined, and second, the amount of water consumption in the equilibrium plan proposed by the Ministry of Energy was calculated. Then, the amount of water saving was determined by considering these two cases in the linear programming model. The results are presented in Table 4.

Table 4

Water consumption and water saving in two cases of unsustainable conditions of water resource withdrawal and sustainable equilibrium model of the Ministry of Energy.

Water saving (m3)Water consumption (m3)
Constraints
Desired sustainable conditions in the Ministry of EnergyCurrent unsustainable conditions
100,000,000 100,000,000 200,000,000 EC < 8,000 
140,624,000 140,624,000 281,248,000 8,000 < EC < 12,000 
29,376,000 29,376,000 58,752,000 EC>12,000 
Water saving (m3)Water consumption (m3)
Constraints
Desired sustainable conditions in the Ministry of EnergyCurrent unsustainable conditions
100,000,000 100,000,000 200,000,000 EC < 8,000 
140,624,000 140,624,000 281,248,000 8,000 < EC < 12,000 
29,376,000 29,376,000 58,752,000 EC>12,000 

The current unsustainable water consumption was 200,000,000 m3 for EC < 8,000; 281,248,000 m3 for 8,000 < EC < 12,000 and 58,752,000 m3 for EC>12,000. In addition, sustainable water consumption in the equilibrium plan of the Ministry of Energy was 100,000,000 m3 for EC < 8,000; 140,624,000 m3 for 8,000 < EC < 12,000 and 29,376,000 m3 for EC>12,000.

The amount of water saving in the optimal model of equilibrium plan of Ministry of Energy compared to the optimal model of current water consumption was 100,000,000 m3 for EC < 8,000, which was equal to 140,624,000 m3 and 29,376,000 m3 for 8,000 < EC < 12,000 and EC>12,000, respectively.

The shadow price (economic value) of water represents the rate of profit change among the farmers in the region per one unit of increase in the amount of available water resources. The results of water shadow price for different qualities of water are displayed in Table 5.

Table 5

Water shadow price (Rial/m3).

Water shadow priceConstraints
161,851 EC < 8,000 
148,269 8,000 < EC < 12,000 
103,213 EC>12,000 
Water shadow priceConstraints
161,851 EC < 8,000 
148,269 8,000 < EC < 12,000 
103,213 EC>12,000 

As shown in Table 5, the shadow price was IRR 161,851 for EC < 8,000; IRR 148,269 for 8,000 < EC < 12,000 and IRR 103,213 for EC>12,000. Furthermore, the freshwater produced the highest economic value for pistachio orchards. The next ranks in the economic value were for moderately saline and highly saline water, respectively. Considering the available data in the questionnaire, pistachio farms are divided into three groups in terms of cultivated area; the associated information is given in Table 6.

Table 6

Classification of different sizes of farmers and their characteristics.

Different size class of farmers
Less than 5 haBetween 5 and 10 haMore than 10 ha
Relative share of cultivated area (%) 19 41 40 
Average pistachio crop yield (kg/ha) 577 750 770 
Average water consumption (m3/ha) 10,153 9,916 10,511 
Gross profit (Rial/ha) 534,654,942 481,347,746 802,341,295 
Profit per cubic meter of water (Rial) 52,660 48,543 76,333 
Water shadow price (Rial/m352,660 48,543 76,333 
Different size class of farmers
Less than 5 haBetween 5 and 10 haMore than 10 ha
Relative share of cultivated area (%) 19 41 40 
Average pistachio crop yield (kg/ha) 577 750 770 
Average water consumption (m3/ha) 10,153 9,916 10,511 
Gross profit (Rial/ha) 534,654,942 481,347,746 802,341,295 
Profit per cubic meter of water (Rial) 52,660 48,543 76,333 
Water shadow price (Rial/m352,660 48,543 76,333 

Results of Table 6 proved that no matter how big the farm is, water's shadow price equals the profit per m3 of water. In other words at the proposed prices to reduce water demand up to the balanced level, farmers are still able to pay for different levels of the garden; therefore, it is practically feasible to execute the pricing policy.

Estimating normative demand function of water and effectiveness of pricing

A normative demand function was estimated to determine a proper price that could effectively reduce water demand. Figure 2 shows the statistical results for the water normative demand for the three qualities of water (freshwater, moderately saline water and highly saline water) and their total.

Fig. 2

Water normative demand with the optimal model in current water consumption (540,000,000 m3/ha).

Fig. 2

Water normative demand with the optimal model in current water consumption (540,000,000 m3/ha).

Close modal

As Figure 2 illustrates, rising water prices reduce the amount of water demand. Based on the results, the price of 1 m3 of water should increase to 150,270 IRR/m3 to reduce the water demand rate from the current rate (540 million m3/year) to the equilibrium plan of Ministry of Energy (270 million m3/year). In addition, the cost of water withdrawal, i.e., the maximum amount of money paid by farmers for water under the current conditions, is only 2,000 IRR/m3. In other words, the price of water should increase by 75 times that of the current cost of water withdrawal in the region to achieve sustainable equilibrium in the region, only through implementing economic methods and increasing price.

Demand price elasticity

The price elasticity of demand for water with different qualities shows that when the water price is increased from IRR 2,000 to 105,213 the amount of water use does not change and the elasticity is zero for highly saline water (EC>12,000). Since poor quality water has a low price, 1% increase in its price has no impact on reducing water consumption. Furthermore, since this water has a low price, on the one hand, and its higher consumption has no significant effect on increasing yield, on the other hand, a further decrease in its price will not motivate its further consumption. In other words, the demand for low-quality water does not depend on its price and is dependent on other factors, e.g., pistachio cultivar, orchard management, soil quality and so on.

At 8,000 < EC < 12,000, the elasticity is −2.4. When the water price is increased from 2,000 to 150,269 IRR, the amount of water use decreases from 281,248,000 to 83,376,000 m3. This implies low elasticity of the water demand function. In other words, farmers do not merely respond to water price increase with less water consumption; rather, their response might be in the form of water re-allocation or a change in the cropping pattern.

Elasticity is −11.52 for water with EC < 8,000 and farmers are more responsive to an increase in the freshwater price so that when it is increased from IRR 2,000 to 222,379, the amount of water decreases from 200,000,000 to 16,104,750 m3.

Eventually, elasticity is highest for the total of water with different qualities. One percent increase in the price results in reducing the demand by 32.83%. Since high-quality water is more expensive, it will be of higher price elasticity. On the contrary, low-quality water has lower price elasticity; hence, the total of water which is composed of different water qualities has higher elasticity.

This study aimed to manage irrigation water demand by emphasizing water pricing policy for its various qualities. In this regard, the economic value for each cubic meter of freshwater, moderately saline water and highly saline water was estimated as IRR 161,851; 148,269 and 103,213, respectively, which was much higher than the amount of water that farmers paid for in the Rafsanjan-Anar plain IRR 2,000/m3 of water, revealing the great difference between the economic and market values of water input. Therefore, in order to improve and sustain the agricultural production system, it is suggested to form motivating forces for saving and properly using water among farmers via adjusting water-rate based on its economic value. Given the gap between the real prices and the agricultural water-rate in the short term, this policy may cause dissatisfaction among farmers and can negatively affect their incentive to produce crops, but in the long run, the gradual increase in the price of water bears more optimal social and economic effects, aiming to balance the benefits and costs of implementing this policy. Also, the price elasticities of the water input demand for freshwater, moderately saline water and highly saline water were −11.52, −2.4 and 0, respectively, hence the demand for moderately and highly saline water.

As a result, the sustainable exploitation of water resources in the region cannot be achieved using solely water pricing tools. In addition to pricing tools, it is necessary to employ other methods such as law enforcement and prohibition of users, recommendation methods, public participation and so forth. Also, the results revealed that the water pricing policy will be well accomplished if it is intended to reduce the consumption of high-quality water resources by the agricultural sector and allocate them to the drinking and industrial sectors. In contrast, if it is intended to protect the water and soil resources and accomplish sustainable development, this policy will fail because price increase will direct farmers towards low-quality water resources and will aggravate the degradation of water and soil resources. In other words, coordination should be made between consumption of water resources reduction and water conservation policies to ensure sustainable development.

Since it is not possible to suddenly increase the water price or set immediate limitations on water usage up to 50% of the current consumption, which may cause socio-economic consequences, it is recommended to execute the policies in several steps. In the first step, if there are no proper water user associations, they should be formed in different regions and employed to encourage farmers to implement the recommended policies. In the second step, minimum water share and, consequently, the minimum cultivated area which could provide the required income should be determined considering the minimum living expenditure per rural family. Afterwards, the farmers with the whole ownership of different agricultural wells less than the minimum expenditure cost should be determined. In the third step, the farmers who encounter subsistence and economic problems after executing pricing policies and restricting water consumption should be led towards non-agricultural jobs and the government should support them. In the fourth step, the optimal economic level of pistachio farms should be determined considering the amount of equitable water and pistachio farms which should be removed are technically specified. In the fifth and final steps, water price should increase (up to the extent that leads to reducing water consumption to the equilibrium level). Furthermore, the number of permits issued for water exploitation wells should be reduced to achieve the equilibrium level.

We thank the Rafsanjan Pistachio Research Institute for helping us with the data, particularly the questionnaires.

This research did not receive any specific grants from funding agencies in the public, commercial, or not-for-profit sectors.

All relevant data are included in the paper or its Supplementary Information.

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Supplementary data