Prospects of Agricultural Water Service Fees in the Irrigated Drylands Downstream of Amudarya

The limited availability of surface water, low water use efficiencies, a deteriorating irrigation network and land degradation aggravated by the impact of climate change are among the factors constraining agricultural production in the irrigated drylands of Central Asia. Recurrently, an introduction of water service fees has been suggested as one option to increase water use efficiency, which is analyzed here at the example of the downstream Amudarya Khorezm region, Uzbekistan. Underlying issues in introducing fees for water services in irrigated dryland agriculture given the state procurement policy are in Uzbekistan of crucial importance. Therefore, the impacts of different levels of water service fees were simulated with a mathematical programming model. The analysis and conclusions are based on changes in regional welfare, cropping pattern, export structure and economic attractiveness of crops to agricultural producers. Although the conclusions refer to the case study region, they help understanding the potential impact of water service fees on the national agricultural sector and add to the discussions on where opportunities for a (partial) cost recovery for the operation and maintenance of the irrigation system of Central Asian countries may exist. It is argued that the introduction of water service fees may indeed generate sufficient funds to recover costs for operation and maintenance of the irrigation network. However, as the current institutional setup constrains a significant reduction of agricultural water demand, the introduction of water service fees as an isolated measure is not likely to achieve the expected benefits unless flanked by additional measures such as reduction of the state production targets on crops.