Pricing irrigation water in Mexico: Efficiency, equity and revenue considerations

The withdrawal of water for irrigation in the dryer regions of Mexico already accounts for some 91% of potential availability. Further expansion of irrigated acreage, therefore, must rely more on increased water use efficiency rather than increased supply from engineering works. A prime instrument to bring about such an improvement could be an appropriate water pricing structure. The first three sections of the paper present the conceptual issues involved, as well as the empirical findings which show that irrigation farmers pay, on average, less than 10% of actual water costs. Water use efficiencies are shown to be less than 50% but are markedly higher in irrigation districts with volumetric compared to those with fixed water charges. The fourth section develops some representative pricing structures that are designed to account for both efficiency and income distributional goals, while the last one addresses some of the likely implementation problems.