In July 1985, the People's Republic of China took an important first step towards promoting greater efficiency in irrigation water usage. The Chinese government instituted agricultural policy reforms which invested a greater degree of financial and managerial autonomy in provincial water management agencies. The policy emphasized “water as a commodity rather than a gift of nature and clearly attributed wasteful consumption and the imbalance between supply and demand to irrationally low water charges” (SOURCE). As a result, irrigation water is priced more closely to what it actually costs, and problems associated with overuse and inefficient distribution have diminished. Irrigation service fees are charged at levels to cover operation, maintenance, and amortization of capital costs. Beginning in 1980 the government switched from financing systems with grants to providing loans. The move provided an extra incentive for water management agencies to collect higher water fees. In general, water charges are determined by what the water actually costs for different uses. For example, charges may vary according to season, and in very dry areas progressive water pricing schemes have been adopted to reflect scarcity.
In Hungxian County, for example, farmers reported a more reliable water supply and were willing to pay more for the guaranteed supply. Management is often further decentralized when a local agency purchases water wholesale and sells it in bulk to smaller water user associations responsible for distribution to farmers. These smaller groups strengthen the bond between the water-user and the supplier who must recover costs. Farmers have begun to irrigate their crops more efficiently, and water use per hectare has declined. Decentralized management has led to more efficient distribution through practices such as distributing water according to land area, levying water charges on a volumetric basis rather than charging a flat rate, and preparing distribution plans in advance. Crop production has improved, with China producing twice as much as similarly irrigated crops in India. Chile has both a system of tradeable water rights and a full-cost pricing policy towards water (Hartje et. al., 1994). Like most other countries in the world, Chile considers water as a national resource, yet individuals are granted perpetual, irreversible, and freely tradeable water use rights independent of land ownership and use. Water use rights are defined for a fixed quantity per unit of time and are awarded following application by a potential user. The General Director of Water (DGA) grants the water right provided that (a) the new water right does not impair existing rights and (b) the ecological
requirement of minimum flow has not yet been reached by previous right allocations. Water use rights are granted free of charge and recorded in a national register; the granting authority reserves the right to restrict water consumption in times of water shortage.
Downstream owners of water rights have a right to a percentage share of the river flow but no
protection against reductions of downstream flows due to increases in upstream use. While owners of consumptive rights (e.g., irrigation) have no specified obligation with regard to quality or quantity of return flows, owners of non-consumptive rights (e.g., hydropower and recreation) are required to return the same quantity and quality of water. The distribution of water according to existing property rights is organized by water users' associations under the control of DGA. The water users'associations are also responsible for maintaining the irrigation infrastructure.
Water rights are freely tradeable and the market for water rights is quite active. Seasonal water rentals are particularly frequent within the agricultural sector. Farmers also sell or lease water rights to water supply utilities who often find such purchases a significantly less costly source than the development of new sources of supply for urban and industrial use. Individual negotiations determine the price of each transaction.
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