Water Pricing and Valuation in Indonesia: Case Study of the Brantas River Basin

• Main Authors: Rodgers, Charles, Hellegers, Petra J.G.J
• Format: Publication
• Language: English
• Published: 01.08.2005
• Subjects: cost recovery; Energy Economics and Policy; institutions; Irrigation > Economic aspects; prices; Resource; value of water; water pricing

The increasing demand for water and limited degree of cost recovery for irrigationwater delivery are important challenges for policymakers in Indonesia. To meet theincreasing demand for water, it is important to reduce water use in irrigated paddycultivation, long the dominant consumptive user, and to divert water away fromagriculture to domestic and industrial sectors. Reducing water use in irrigated agriculturecan be achieved through various means, including rationing, improved user management,and water markets. The appropriate method depends on the situation specific to eachbasin. In the Brantas Basin in East Java, rationing is already practiced, but often leavesthe non-licensed, (non-paying) irrigators with insufficient supplies. Moreover, very lowirrigation service fee recovery rates hamper ongoing water sector reforms, which seek tostrengthen the capacity of local institutions to co-manage water resources. In the BrantasBasin the average value of water in the production of important irrigated cropssubstantially exceeds estimated water supply costs and current ISF. However, increasedwater use fees would impose a substantial burden on farm economic welfare, while watersavings would be relatively modest. Therefore, to conserve water and enhance thefinancial autonomy of irrigators alternative management systems are proposed, including‘Integrated Crop and Resource Management’ and a water brokerage mechanism.