# EXECIJTIVE SUMMARY

As a result of the Bank's implementation of the 1993<sup>Water Resource Policy, loans for</sup> investment in water projects often include a component requiring<sup>the implementation of some</sup> form of water pricing. If this conditiort is to serve a useful<sup>purpose, water pricing should be</sup> implemented appropriately. Yet, the notion of desirable (or optimal)<sup>water pricing does not at all</sup> command consensus among economists, let alone policy makers.<sup>Despite the pervasiveness of</sup> water pricing in developed countries, there is still disagreement<sup>regarding the appropriate means</sup> by which to price water and the levels ol water charges.<sup>This is partly due to confusion of basic</sup> fundamentals, and also because the performance of a water<sup>pricing method is quite sensitive to</sup> the prevailing conditions. Moreover, many countries<sup>lack the tradition, experience, and</sup> appropriate institutions to price irrigation water. This enhances<sup>the need for a comprehensive</sup> study that will (a) resolve common mis-onceptions and myths<sup>associated with irrigation water</sup> pricing, (b) define precisely the notion of efficient water<sup>pricing, account for implementation</sup> costs, (c) define and incorporate equity criteria, and (d) put together<sup>a guideline for water pricing</sup> in a wide variety of circumstances. The project, "Guidelines<sup>for Pricing Irrigation Water Based</sup> on Efficiency, Implementation and Equity Concerns," funded<sup>by the research committee of the</sup> World Bank will address this issue.

This literature review then serves to provide the necessary foundation<sup>of existing nornative and</sup> positive studies relevant to pricing irrigation water<sup>as related to this project and will be included</sup> as a chapter in the aforementioned project. In addition, it is hoped<sup>that the included literature and</sup> discussion will provide a useful reference and foundation<sup>of relevant pricing issues for irrigation</sup> practitioners.

Tsur and Dinar (1995, 1997) analyzed different pricing<sup>practices vis-a-vis their efficiency</sup> performance, cost of implementation, and equity effects. Along<sup>these lines, this literature survey</sup> seeks to review and synthesize the most relevant and current research<sup>available pertaining to the</sup> many aspects of irrigation water pricing. The body of literature<sup>examining these movements is</sup> vast and diverse. Most works are normative in nature, dealing<sup>with how water should be priced,</sup> with some description of actual practicalities and applications.<sup>A few are purely description</sup> (e.g., Dinar and Subramanian, 1997). There are many compilations,<sup>which include the literature</sup> of a particular aspect of water pricing and irrigation:

- _Conflict and Cooperation on Trans-Boundary Water Resources,_<sup>edited by Richard Just</sup> and Sinaia Netanyahu.

- _Markets for Water: Potential and Performance,_ edited by K.<sup>William Easter, Mark W.</sup> Rosegrant, and Ariel Dinar.

- _Decentralization and Coordination of Water Resource Management,_<sup>edited by Douglas</sup> D. Parker and Yacov Tsur.

- _Economics of Water Resources. From Regulation to Privatization,_<sup>edited by Nicolas</sup> Spulber and Asghar Sabbaghi.

- _The Economics and Management of Water and Drainage in Agriculture,_<sup>edited by Ariel</sup> Dinar and David Zilberman.

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