Simulation of effects of agricultural water price policy based on positive mathematical programming

Rational water price policy is of great significance for the efficient use of water resources. However, development processes of water price policy are mostly subjective and few methods are suitable to quantify policy effects. In this study, we focused on irrigation areas with multiple water sources and irrigation techniques. A method based on positive mathematical programming (PMP) was proposed to simulate the impacts of agricultural water price policy on economic benefits of water use, irrigation water consumption, planting land occupation and water-saving irrigation area. This method was applied to address a case in Minqin County, Gansu Province. Under the current water price policy of the study area, the model was calibrated with the actual data in 2015, the absolute value of the difference between the optimal solution of the calibrated model and the actual planting area in the base year didn’t exceed 1.3×10-3 hm2, indicating that the model was reliable to simulate the effect of water price policy. Subsequently, the model was used to simulate the change trend of index with the rise of water price under the volumetric water price policy, the 2-part water price policy and the differential water price policy. The simulation results showed that, with the rise of water price, the change trend of index under 3 water price policy was similar: the farmer income reduced, the irrigation water consumption and planting area reduced first and then stabilized, the water-saving irrigation area increased, and the benefit per cubic meter of water increased first and then decreased. Simultaneously, in response to rising water price, farmers tended to reduce the planting area of food crops first and then the area of cash crops to alleviate the loss of income. Based on the simulation results, the water price threshold under different policies and the scope of application of various policies were further analyzed, and the following conclusions were drawn. Under the volumetric water price and the 2-part water price policy, the water price should be between 0.24 yuan/m3-2.10 yuan/m3; under the differential water price policy, the water price should be between 0.24-1.50 yuan/m3; when the metering part of the water price was lower than 2.10 yuan/m3 or higher than 6 yuan/m3, the comprehensive benefit of the differential water price policy was the highest; when the metering part of the water price was between 2.10 yuan/m3 and 6 yuan/m3, the volumetric water price policy was the most ideal; when the differential water price policy was implemented and the metering part of the water price was 1.50 yuan/m3, the benefit per cubic meter of water was the highest. This paper confirmed that the steady increase of water price would not reduce the comprehensive benefits of water use, but increase the benefit per cubic meter of water. The differential water price policy currently implemented in Minqin County was appropriate. In the future, in Minqin County, the water price under the differential water price policy should be increased within the range of 0.24-1.50 yuan/m3. Moreover, during the course of water price rising in the study area, special attentions should be paid to increase investment in water-saving irrigation projects and farmer income subsidy policies should be established under local contexts. Based on the conclusions of this study, various local factors and evaluation indexes such as current water price, farmers' willingness to pay, government financial subsidies, and income from water supply projects, could be comprehensively considered to obtain detailed implementation plan of water price policy. The method established in this paper was also applicable to other areas with similar problems.