However, even with the sufficient information and known about the marginal value of
water, the implementation of water pricing policy at or close to its marginal value is difficult in
most of developing and developed countries. The obstacle is mainly from the lagged effect of
historical water pricing policies. In many countries where irrigated agriculture plays an important
role, farmers believe low or zero charges are justified. This belief is usually reflected in their
political systems (Abu-Zeid). Some countries may also lack the tradition, experience, and
appropriate institutions to price irrigation water. Many water scarce countries have adopted
macroeconomic policies that have negative effects on agriculture in general and water in
particular (Diao, Roe, and Doukkali). Most developing countries provide irrigation and domestic
water supply systems at subsidized rates. By doing so they can secure water and food supplies,
protect public health, and avoid opposition from farmers and urban poor to raising water prices
(Abu-Zeid).
Molle (2002) summarized the reasons why water charges have been generally low for
agriculture: (1) political sensitivity to increases in food prices; (2) competitiveness in
international markets; (3) the depressed level of most staple food prices as well as their
fluctuating nature; and (4) the political risks associated with a significant increase in water
charges. Numerous studies suggest that maintaining low water tariffs will make this policy
instrument ineffective in improving water allocation efficiency and increasing agricultural
productivity (Molle, 2001; De Fraiture and Perry; Perry, 1996; Ogg and Gollehon). Ray looked
at the social and economic impact of increasing water price in western India. She concluded that
“significant price increases are politically infeasible, and feasible price increases are
economically insignificant.” Perry (1996) also found that volumetric charges in Egypt were an