Economic Valuation of Irrigation Water, The Case of Erere Woldia Irrigation Project In Harari Regional State, Ethiopia
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Date
2010-07
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Addis Ababa University
Abstract
The growing demand for water in different sectors of the economy due to populotion pressure,
expansion of economic activities combined with the increased cfimatic variabifity calls for the
efficient utilization of the resource. Accordingly, the Ethiopian water policy and strategy
considers water as an important econamic good with some social objectives. To this effect, the
palicy advocates the introduction of site specific irrigation water fee as a tool to stimulate the
sustainable development of the sector. The most important site specific factor is the willingness
to pay of the farmers. Since any irrigation pricing endeavar should consider this factor, this
study was undertaken in Harari Regional state, Erere Weldia small scale irrigation project, so as
to provide a baseline information far the local authorities on the willingness to pay of farmers
for improved irrigation water services. The study employed a multi- stage purposive sampling
and random sampling techniques in the selection of the study site and the respondents,
respectively. Primary Data was collected through structured questionnaire, in-depth case study
and key informant interviews. Relevant secandary data was also collected. Both quantitative
(descriptive statistics and econometric estimation) and qualitative data analysis methods were
employed. A contingent valuation method was employed to elicit farmers' willingness ta pay for
improved irrigation water. The open and cfosed ended elicitation techniques were used to
estimate farmers' willingness to pay. In determining the factors that affect the maximum price
farmers are willing ta pay, the OLS method was used. Nine variables out of fifteen were
significant. Size of cultivable land, access to cash credit, experience with irrigation, land fertility,
perception about water scarcity and dissatisfaction with the existing project have a positive
effect whife age, household size and cultivating water demanding crops have a negative effect.
In addition, to determine the factors that affect the willingness ta pay (accept) the bid price, the
Logit model was employed. Seven variables were significant. Frequency of DA visit, experience
with irrigation, income and perception about water scarcity were found to have a positive
effect, while the size of cultivable land, amount of fe rtilizer used and dissatisfaction with the
existing project have a negative effect. The fact that the variables: the size of cultivable land and
dissatisfaction with the existing project are significant in both models but have 0 different sign
necessitate further study on the effect of these variables on the decision of the farmers'. Among
the surveyed households, 98% have shown their willingness to pay if the current water supply
situation is improved. And hence this gives good reason for investment to expand the irrigation
project and introducing water fee by taking into account the effect of the significant variables in
both models.
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Keywords
Erere Woldia Irrigation Project