How could we realize a win-win strategy on irrigation price policy? Evaluation of a pilot reform project in Hebei Province, China

- Two-round field survey data was collected in 2009 and 2012 and econometric models were established.
- Real price reform is found to reduce farmers' groundwater use for irrigating crops.
- Key mechanism of the pilot reform is to provide an incentive for farmers to reduce their use of irrigation.
- Government subsidies are very important for realize the win-win price reform strategy.

SummaryThe challenge of increasing irrigation prices while increasing farmers' income exists not only in China but in other countries as well. The overall goal of this paper is to evaluate whether a win-win strategy can be realized in a pilot reform in Hebei, China. The data came from a two-round field survey in 2009 and 2012, which indicated that the key mechanism of the pilot reform was that farmers received similar returns (including reallocated, increased irrigation fees and a government subsidy), but paid different irrigation fees; the difference between the returned money and payment was treated as an incentive for farmers to reduce their use of irrigation. The econometric results showed that in pilot reformed villages, local farmers' groundwater application for irrigating wheat and cotton could decrease by 21% each. If no subsidies are granted, roughly half of the region's farmers would lose money due to the reform. However, most farmers who receive subsidies were able to earn money in the pilot reformed villages. If several issues are properly resolved (such as selecting more representative villages, increasing the subsidy value, and negatively linking the subsidy with water use), it would be possible for more regions to realize a win-win price reform strategy.