Principal investigator: Eduarda Miller de Figueiredo
Paper title: Inefficient water pricing and incentives for conservation
Location of the Intervention: Bangladesh
Authors: Ujjayant Chakravorty, Manzoor H. Dar and Kyle Emerick
Sample Size: 400 villages
Sector: Environment
Primary Variable of Interest: Water management, input costs, and agricultural profits.
Type of Intervention: AWD technology – irrigation pipes
Methodology: Experimental Evaluation
Technology contributes to potential solutions for using water more efficiently. Alternate Wetting and Drying (AWD) is a perforated plastic tube, open at both ends, that is planted in a rice field to irrigate only when the crop needs water. A random sample of 400 villages from three districts in Bangladesh was drawn and monitored during the season of “boronThe results demonstrate that AWD only has an effect on water levels for farmers facing non-zero marginal prices.
Policy Problem
Agriculture is responsible for almost 70% of the world's water use (FAO, 2016). Developing countries have increased their food production by irrigating their crops during the dry season; consequently, the expansion of subsurface irrigation has caused depletion in many regions, especially in Asia.
Technology contributes to potential solutions for using water more efficiently. Alternate Wetting and Drying (AWD) is one such solution, where a perforated plastic pipe, open at both ends, is planted in a rice field to irrigate only when the crop needs water. The profitability of this technology crucially depends on whether farmers face volumetric pricing and whether it has an effect on profits from seasonal water charges.
Implementation and Evaluation Context
The aim of this article is to examine how a basic market failure, in the form of a zero marginal price for water, affects the use, impact, and demand for AWD technology.
The experiment took place in three districts: Mymensingh, Rangpur, and Rajshahi. In Rangpur and Rajshahi, the water table is deeper, so wells are expensive to dig and therefore almost always belong to the government. In Mymensingh, however, wells are privately owned because the water table is shallower, reducing the cost of digging a well.
In Rajshashi, water has a volumetric price where farmers can pay for each hour of pumping using a prepaid card. This card is loaded at local shops, in the same way that prepaid cell phones are loaded. In Rangpur, a fee per acre is required for the right to irrigate the field for the entire season. In Mymensingh, well owners widely use acre charges, where contracts take the form of a two-part tariff, where the acre fee is associated with a charge for each unit of fuel or electricity used during pumping. For the purposes of this research, the authors assume that the farmer faces a volumetric price whether they reside in a location with a prepaid pump or when they reside in a location where they are responsible for the fuel costs of pumping.
Approximately 90% of the land is cultivated with rice during the rainy season from June to November. All the land is cultivated with rice during the "boron"From January to May. It is during this season of "boronThe experiments in the study take place because rainfall is rare in this region during that period, and therefore rice cultivation requires irrigation.
Policy/Program Details
A random sample of 400 villages was drawn, divided equally among the 3 districts mentioned above. A survey was conducted at the beginning of the study with the 4.000 farmers involved, comprising data on family demographics, agricultural production, water management and water prices.
Each village was randomly assigned to one of the two groups before the start of the season of “boronIn 2017, the study team visited the 200 villages in the treatment group, where each farmer was provided with an AWD tube and appropriate training. In the other 200 villages in the control group, nothing was done.
Regarding descriptive statistics, only 17% of farmers had heard of AWD, but none of them were using this technology at the time. Slightly more than a third of farmers face a non-zero marginal price for water.
Method
To estimate the causal impact of AWD technology on water management, input costs, and agricultural profits, the average effect across the entire sample was reported. Heterogeneous effects and the average treatment effect were reported. Increased acceptance of AWD should increase the likelihood that treated farmers are being dry, i.e., have no standing water in the field.
A follow-up survey was also conducted in July 2017, after the rice harvest.boron"Having been harvested and close to planting time for the next rainy season. This research allowed the collection of information on irrigation management, input use, crop production, revenue, and profit. Therefore, this data provides a basis for profitability calculations and the effect of AWD on profit."
The proportion of farmers using prepaid irrigation cards in many villages is less than one. The authors identified 144 villages in the Rajshahi district, not included in the first experiment, where most farmers were not using their own prepaid card. These were randomly divided into two groups of 96, with one becoming the treatment group, where the authors sought to increase the proportion of farmers paying for irrigation using their own card. To determine whether the demand curve for AWD changes when farmers are incentivized to pay for water at pumping time, a random variation in AWD prices was used with the random incentive of credit card use.
Main results
The results demonstrate that the treatment increases the drying effect by approximately 4%, but it is a significant average effect. Furthermore, AWD only has an effect on water levels for farmers facing non-zero marginal prices.
The introduction of AWD technology in locations with high volumetric prices reduces the amount of irrigation water by 18%. However, the correlation between volumetric price and water use is small and statistically insignificant; nevertheless, the authors point out that this result may be driven by any limited variation within the strata or correlation between unobservables and volumetric prices.
The estimates found align with agronomic literature only when prices are defined in volume metrics. Where the estimated water savings from experiments range from 5% to 65%, the effect found in this study was 19,2% on water levels when prices are volumetric.
Post-harvest research demonstrated that farmers receiving AWD reported 3,6 fewer irrigations – a 19% impact. The reasonable explanation for this effect, according to the authors, is that farmers in the treatment group knew that using AWD reduces the number of irrigations and responded accordingly.
Regarding profit, it only increases with the adoption of ADW when the price of water is marginal, with an increase of approximately 7% (US$ 23). It has been shown that the overall effect on profitability comes from lower water costs and higher revenues, and not from increases in yield. Therefore, ADW leads to positive returns only when the price of water is marginal.
For those farmers using Rajshashi (prepaid cards), the results demonstrate that AWD increases profits by 11% to 12% for farmers with cards; however, this prepaid card system is not randomly assigned. Therefore, such a result may be due to factors correlated with card ownership rather than the card itself.
The results for the estimates for the Rajshahi prepaid card sample show that there were high acceptance rates, but that the introduction of hourly irrigation cards caused the demand for AWD to increase at higher prices.
Furthermore, the results demonstrated that AWD technology can offer substantial benefits. However, farmers who value the technology and use it appropriately depend on water having a marginal price.
Lessons in Public Policy
This article demonstrates that modest efforts to reduce application costs and increase farmer access at marginal prices have a positive and significant effect on the demand for water conservation technology. Thus, it contributes to the literature on water prices, given that water has become increasingly scarce, making its efficient use in agriculture necessary.
References
FAO. 2004. Water charging in irrigated agriculture. An analysis of international experience. HR Wallingford Ltd.
