Irrigation water pricing based on the ELES-WPTI model in the Yinda-Jihuang project of China

Abstract

Abstract Water pricing is the key to maximizing the economic and social benefits of the water transfer project. In this study, we propose the extended linear expenditure system-water price tolerance index (ELES-WPTI) model that combines the ELES model and the WPTI method for water pricing. Firstly, the ELES model is used to estimate the price elasticity of water demand and the basic demand for farmers of different income levels. Secondly, the WPTI method is used to simulate and analyze the affordability of farmers of different income levels for agricultural water under the dynamic change of water price standards. Finally, the ELES-WPTI model is applied to the Yinda-Jihuang (YJ) Project, China, to determine the appropriate agricultural water price. The results reveal that the farmers in the DH district have slightly higher affordability of water price than that in HL District. As water consumption should account for less than 15% of the total production cost and 10% of the net income, the affordable water price is determined to be 237 $/hm² in the DH district and 205 $/hm² in the HL district, respectively.