cropping area of wheat, maize, bean, legume, and sugar beet. The main contributions to
irrigation water reduction are from sugar cane and paddy rice. Although other crops demand
more irrigation water as the output tax rate increases, their effects on demand for water is very
small. More land moves out of production and can not be shifted to producing these crops due to
the model constraint on export. Land will be allocated to producing more cotton and vegetables
when the demand constraint is eliminated from the model.
Individual policy scenario analyses compare the scenario results with the base level.
However, because the high sensitivity of the model to any cost and revenue change, the changes
in irrigation water demand, welfare level, cropping pattern, and generated revenue provide good
indicators of the direction of change, but not necessarily an accurate magnitude of change from
the base level. Because the main purpose of this research is to look at some alternative policy
options other than water pricing to identify the possible chances of adopting these policies which
may achieve similar goals to water pricing policy, it is more constructive to compare the results
of each policy with the water pricing results instead of the base level.
Figure 1 plots the percentage of welfare change in the agricultural sector caused by each
policy scenario, contrasting with its percentage change of irrigation water demand. The pattern
of welfare change and irrigation water decrease converges at the water cost recovery level and
lower input or output tax shocks. The pattern of change on welfare and irrigation demand
diverged when input or output taxes are high. Output tax appears to work better than water
pricing policy. However, there are equity concerns related to farmers whose major crops are
paddy rice or sugar cane. It will be hard for them to change the crop mix in the short run.
Welfare measure change in agricultural sector is negative as it is shown in Figure 1. This is
because the welfare measure in this study includes agricultural commodity consumers’ and
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