ALLOCATIVE EFFICIENCY AND EQUITY IN CHARGING FOR IRRIGATION WATER: A CASE STUDY IN EGYPT

The system of charging for irrigation water is of concern as a source of revenue, for its impact on resource allocation and its income distribution effects. The objective of the dissertation is to evaluate several methods of charging for irrigation water in Egypt according to allocative efficiency and equity criteria. The general approach is to model resource allocation decision-making for a series of representative farms and to estimate the response of farmers to different water supply scenarios and pricing instruments.; Linear programming models are formulated for farms in a study area located in the lower Nile delta. Model solutions are based on both government price and production controls and on hypothetical market prices and relaxed controls. Five methods of water charges based on cultivable or cultivated area and four volumetric pricing instruments are evaluated. The level of charges is set to recover full budget operating costs of providing irrigation water plus estimated administrative costs of the various pricing instruments.; The allocative efficiency objective is the maximization of net social returns to irrigation. Income equity is measured but the definition of an optimal distribution of income and the social weights attached to each efficiency and equity objective is not attempted. Because taxation of farmers in the study area is found to be very high, the analysis presumes that water charges will partially replace, rather then supplement, existing taxes.; Area based pricing instruments, in particular the flat land tax, are determined to be most appropriate to present and expected near-term water supply conditions in Egypt. Area taxes are simple and easy to administer. When water is not a limiting resource or when administrative rules produce an acceptable distribution of water, area charges are an inexpensive and efficient method of recovering costs.; The benefits of pricing water volumetrically must exceed the high cost of measuring water. Volumetric pricing instruments were more equitable than area taxes when water is limited but were more efficient only under severe shortages of water.