Introducing Water Pricing Among Agricultural Producers In Khorezm, Uzbekistan: An Economic Analysis

The extensive use of water in agriculture in the Amu Darya and the Syr Darya basins has led to the desiccation of the Aral Sea. The lack of water pricing in Uzbekistan does not provide incentives for local agricultural producers to improve water use efficiency. Although water pricing may decrease water intake in and increase its outflow from Khorezm to the Aral Sea, the impacts of this policy on regional consumers and agricultural producers can be random. Different rates of water prices will cause different regional cropping patterns, which will bring a new system of commodity prices and, as a result, will affect the population income and food consumption in the region. Therefore, a proper rate of water pricing should be derived and its impact on regional agriculture should be established. To this end, this policy evaluation, which is part of a wider Ph.D. research project, consists of a microeconomic analysis of agricultural reforms in Khorezm based on a sector model (KhoRASM) which reflects the unique features of the region's agriculture. The model integrates three components: (1) an agricultural sector model; (2) a linear supply module with three types of agricultural producers; and (3) a flexible demand system (Normalized Quadratic-Quadratic Expenditure System) with two types of consumers. The specific objective of this study is to provide information about possibilities of introducing water pricing such that economic efficiency of water use in the region can be improved.