However, water consumption would be more
than halved. This would be a desirable outcome
for irrigation water consumption but unacceptable for politicians, whose constituents would be
affected by large negative income shocks. As a
result, these negative income effects need to be
directly addressed by the Iranian government. In
the next chapter, we will examine the political
processes surrounding the Iranian government’s
attempts to introduce these reforms.
3 The Political Economy
of the ‘Energy SubsidyGroundwater Pumping’ Nexus
In light of the discussions about Iran’s water
crisis, it is important to examine institutions that
may have contributed to the overuse of groundwater for agriculture. This will enable the design
of future policies for the efficient and sustainable
use of groundwater resources. The 2010 attempt
to phase out energy subsidies represents an
opportunity to analyze the political economy of
an unsuccessful reform in the realm of subsidy
elimination for groundwater pumping. We utilize
a World Bank framework for reform analysis
from the political economy perspective (World
Bank 2008). It provides a practical way to analyze economic reforms by focusing on several
different aspects: (1) the reform context; (2) the
reform arena that stipulates examining institutions, stakeholders, and involved economicpolitical interests; and (3) the reform process.
Following this framework, we review the major
regulations regarding water use and consumption
within Iranian agriculture. Afterwards, we analyze the context, arena, and process of the Iranian
reform attempt to phase out energy subsidies,
with a particular focus on the agricultural
context.
5
3.1 Reform Context
As this subsidy reform was a law that was proposed by the government and was approved by
the parliament, we review the rules and regulations that cover water-energy management using
economic instruments. Table 5 shows the major
rules and regulations that represent the economic
instruments of groundwater resource management. Additionally, it displays the various organizations that are responsible for issuing a
particular regulation and their effects on surface
and groundwater use in agriculture. As we can
see, the regulatory structure of the water/energy
sector does not offer much guidance for the
efficient and sustainable use of water resources.
The only notable law on the list was part of the
subsidy reform (the “Elimination of indirect
subsidies”, implemented in 2010), and it could
have positive economic effects, as well as
encourage more efficient groundwater use by
eliminating energy subsidies for water pumping.
However, this reform was not successful in its
implementation. In the next subsections, we will
discuss the potential factors that may have contributed to the unsuccessful implementation of
this initiative in agriculture in comparison to
other sectors. Although the economic value of
water is emphasized in Iran’s development
plans,
6 the actual legislative framework does not
contribute to the efficient use of water.
After providing an overview of the laws and
regulation and their relationship, we analyze the
context of subsidy reform from 2009–2010. The
government of Iran announced its plan to eliminate its energy subsidies and some basic commodity subsidies, such as those for bread, for all
types of consumers during the 5 year period
starting in 2008. This plan was approved by the
parliament after minor modifications in 2009 and
was implemented at the end of 2010. As a
compensation scheme for the reform’s negative
5
For instance, Iran spent 22.6% of its GDP on fuel
subsidies in 2010.
6
For instance, article 17 of the Fourth Five-Year Country
Socio-Economic Development Plan (Majlis of Iran
2004b, Act no. 96/66,911) established an obligation to
find, and to consider, the economic value of water of all
river basins of the country. It also asked the government
to prepare operational guidelines for this purpose.
116
T. Jamali Jaghdani and V. Kvartiuk
than halved. This would be a desirable outcome
for irrigation water consumption but unacceptable for politicians, whose constituents would be
affected by large negative income shocks. As a
result, these negative income effects need to be
directly addressed by the Iranian government. In
the next chapter, we will examine the political
processes surrounding the Iranian government’s
attempts to introduce these reforms.
3 The Political Economy
of the ‘Energy SubsidyGroundwater Pumping’ Nexus
In light of the discussions about Iran’s water
crisis, it is important to examine institutions that
may have contributed to the overuse of groundwater for agriculture. This will enable the design
of future policies for the efficient and sustainable
use of groundwater resources. The 2010 attempt
to phase out energy subsidies represents an
opportunity to analyze the political economy of
an unsuccessful reform in the realm of subsidy
elimination for groundwater pumping. We utilize
a World Bank framework for reform analysis
from the political economy perspective (World
Bank 2008). It provides a practical way to analyze economic reforms by focusing on several
different aspects: (1) the reform context; (2) the
reform arena that stipulates examining institutions, stakeholders, and involved economicpolitical interests; and (3) the reform process.
Following this framework, we review the major
regulations regarding water use and consumption
within Iranian agriculture. Afterwards, we analyze the context, arena, and process of the Iranian
reform attempt to phase out energy subsidies,
with a particular focus on the agricultural
context.
5
3.1 Reform Context
As this subsidy reform was a law that was proposed by the government and was approved by
the parliament, we review the rules and regulations that cover water-energy management using
economic instruments. Table 5 shows the major
rules and regulations that represent the economic
instruments of groundwater resource management. Additionally, it displays the various organizations that are responsible for issuing a
particular regulation and their effects on surface
and groundwater use in agriculture. As we can
see, the regulatory structure of the water/energy
sector does not offer much guidance for the
efficient and sustainable use of water resources.
The only notable law on the list was part of the
subsidy reform (the “Elimination of indirect
subsidies”, implemented in 2010), and it could
have positive economic effects, as well as
encourage more efficient groundwater use by
eliminating energy subsidies for water pumping.
However, this reform was not successful in its
implementation. In the next subsections, we will
discuss the potential factors that may have contributed to the unsuccessful implementation of
this initiative in agriculture in comparison to
other sectors. Although the economic value of
water is emphasized in Iran’s development
plans,
6 the actual legislative framework does not
contribute to the efficient use of water.
After providing an overview of the laws and
regulation and their relationship, we analyze the
context of subsidy reform from 2009–2010. The
government of Iran announced its plan to eliminate its energy subsidies and some basic commodity subsidies, such as those for bread, for all
types of consumers during the 5 year period
starting in 2008. This plan was approved by the
parliament after minor modifications in 2009 and
was implemented at the end of 2010. As a
compensation scheme for the reform’s negative
5
For instance, Iran spent 22.6% of its GDP on fuel
subsidies in 2010.
6
For instance, article 17 of the Fourth Five-Year Country
Socio-Economic Development Plan (Majlis of Iran
2004b, Act no. 96/66,911) established an obligation to
find, and to consider, the economic value of water of all
river basins of the country. It also asked the government
to prepare operational guidelines for this purpose.
116
T. Jamali Jaghdani and V. Kvartiuk