172
informal rules, norms, customs and habits in Uzbekistan’s agricultural sector that
shape farmers’ behaviour. We will show that effi cient pricing (in the sense that economic incentives are set for water users) cannot easily be achieved under such conditions. This leads to the conclusion that proposals for institutional reforms in
relation to major water infrastructure projects cannot be based on a “nirvana
approach” but have instead to be examined carefully with respect to the specifi c
political, administrative and cultural conditions at hand. Nevertheless, in the fi nal
section we point out some possible pathways for step-by-step reforms that at least
point in the direction of water-related reforms.
12.2 Some Economics of Water Pricing
Setting prices for environmental goods such as water resources serves several
functions (Rogers et al. 2002 ; Young 2005 ):
1. Financing function : By introducing water levies (be it a fee, charge, tax, special
contribution, or some other form of public fi nancing), public revenues are generated that can be used for investments in the water sector. So one goal of introducing water prices is to generate fi nancial resources in order to fi nance water-related
infrastructures.
2. Information function : It is assumed that water prices, if properly calculated,
reveal the “true value” of water resources. Demonstrating the true value of water
by pricing water resources may serve to refl ect the value a society accords to
water resources. This is a prerequisite if water users are to obtain the necessary
information about water scarcity and to carry the “full costs” of water when making decisions about water resource use.
3. Incentives function : By providing price signals that have to be integrated into
decision-making, water users are incentivised to calculate the cost of water
(including private and social costs) as part of their decisions regarding their use
of water resources. Thus, private and public decisions will be changed, and water
saving can be achieved if water users are confronted with the full costs of water.
Water pricing can thus be seen as a management principle that leads to more
sustainable water use. For many water experts, then, setting adequate incentives
is a fundamental prerequisite for achieving effi ciency in water resource use.
Interestingly (but not surprisingly), current discussions about water pricing in
the Fergana Valley focus solely on the fi nancing function. There are several reasons for this:
• First, since the building of the Fergana Canal and the Fergana Valley irrigation grid
system in the late 1930s, water management has been considered mainly as a technical enterprise: Building, sustaining and managing the technical infrastructure
have primarily been seen as the main task of water management engineering. All
technical, managerial and fi nancial resources have been devoted to building and
B. Hansjürgens
informal rules, norms, customs and habits in Uzbekistan’s agricultural sector that
shape farmers’ behaviour. We will show that effi cient pricing (in the sense that economic incentives are set for water users) cannot easily be achieved under such conditions. This leads to the conclusion that proposals for institutional reforms in
relation to major water infrastructure projects cannot be based on a “nirvana
approach” but have instead to be examined carefully with respect to the specifi c
political, administrative and cultural conditions at hand. Nevertheless, in the fi nal
section we point out some possible pathways for step-by-step reforms that at least
point in the direction of water-related reforms.
12.2 Some Economics of Water Pricing
Setting prices for environmental goods such as water resources serves several
functions (Rogers et al. 2002 ; Young 2005 ):
1. Financing function : By introducing water levies (be it a fee, charge, tax, special
contribution, or some other form of public fi nancing), public revenues are generated that can be used for investments in the water sector. So one goal of introducing water prices is to generate fi nancial resources in order to fi nance water-related
infrastructures.
2. Information function : It is assumed that water prices, if properly calculated,
reveal the “true value” of water resources. Demonstrating the true value of water
by pricing water resources may serve to refl ect the value a society accords to
water resources. This is a prerequisite if water users are to obtain the necessary
information about water scarcity and to carry the “full costs” of water when making decisions about water resource use.
3. Incentives function : By providing price signals that have to be integrated into
decision-making, water users are incentivised to calculate the cost of water
(including private and social costs) as part of their decisions regarding their use
of water resources. Thus, private and public decisions will be changed, and water
saving can be achieved if water users are confronted with the full costs of water.
Water pricing can thus be seen as a management principle that leads to more
sustainable water use. For many water experts, then, setting adequate incentives
is a fundamental prerequisite for achieving effi ciency in water resource use.
Interestingly (but not surprisingly), current discussions about water pricing in
the Fergana Valley focus solely on the fi nancing function. There are several reasons for this:
• First, since the building of the Fergana Canal and the Fergana Valley irrigation grid
system in the late 1930s, water management has been considered mainly as a technical enterprise: Building, sustaining and managing the technical infrastructure
have primarily been seen as the main task of water management engineering. All
technical, managerial and fi nancial resources have been devoted to building and
B. Hansjürgens