The effects of reducing the subsidy for irrigation water pumping in México

1. The effects of reducing the subsidy for irrigation water pumping in México Jesús Aguirre Chávez August 2013

2. Outline • Introduction • Water and agriculture in Mexico • “La costa de Hermosillo”a integrated basin tool • The Method of analysis • Results • Conclusion

3. Introduction • The state of Sonora is one main producers of agricultural products in the country. • Agricultural production relies on groundwater aquifers. • It has been used until a point far beyond the carrying capacity of ecosystem • Water and agriculture La costa de Hermosillo The Method of analysis Results Conclusion

4. Statement of the problem Introduction • The underground aquifers in the state of Sonora in México are facing the problem of over-extraction. • The agriculture is the main user of the water • Asubsidy on electricity for pumping water indirectly reduces the price of this resource • Water and agriculture La costa de Hermosillo The Method of analysis Results Conclusion

5. Objectives Introduction • Study if the elimination of the subsidy will lead to a reduction of the water extraction • Analyze the effect of an increase on the price of electricity, by a reduction of the subsidy • Analyze the impacts in the crops allocation in the district • Water and agriculture La costa de Hermosillo The Method of analysis Results Conclusion

6. Water and agriculture in Mexico Introduction • The area in Mexico that corresponds to desertification is 65 per cent of the national territory • The country can divided in two big blocks according to the water natural availability • Water and agriculture La costa de Hermosillo The Method of analysis Results Conclusion

7. Water in the Agricultural sector Introduction • The agricultural production represents only 3.5 per cent of the GDP • The number of people that depends indirectly from this activity arises to 25 million people. • The sector uses 70 per cent of the national water • Water and agriculture La costa de Hermosillo The Method of analysis Results Conclusion

8. Water in the Agricultural sector Introduction • Around 7 million of hectares are irrigated and 14.5 million are from rain-fed • 6th place in term of irrigated surface in the world • On the irrigation districts is because on them takes part most of the agricultural production of the country • Water and agriculture La costa de Hermosillo The Method of analysis Results Conclusion

9. Tariff of electricity Introduction • “9-CU tariff” is the tariff of 0.26 cents for electricity in the agricultural sector with the subsidies • “tariff 9” is of about 1.03 cubic meter of water per kilowatt • Water and agriculture La costa de Hermosillo The Method of analysis Results Conclusion

10. Introduction • The irrigation district that is studied in this work is part of the state of Sonora • It is a plain of semi-arid climate, with an extension of around 200,000 ha • hydrological underground resources constitute the main source of water for the agricultural sector • Water and agriculture La costa de Hermosillo The Method of analysis Results Conclusion

11. Introduction • The model designed by Frank A. Ward and Macarena Dagnino (2012) is used and modified to analyze the effects of decreasing the subsidies for electricity consumption • Based on the framework of Positive Mathematical Programming • Crop yield function that has decreasing yields when there are greater amounts of land in production • Water and agriculture La costa de Hermosillo The Method of analysis Results Conclusion

12. Introduction • The model find the combination of land used per crop and amount of water used that maximizes the total farm profit when the price of water changes • Water and agriculture La costa de Hermosillo The Method of analysis Results Conclusion

13. Introduction • The maximization problem of the regional farm depends on the changes of the water used and thus by differentiating the regional farm profitability with respect to additional water used • Water and agriculture La costa de Hermosillo The Method of analysis Results Conclusion

14. Introduction • Five scenarios were made in order to see the changes with different subsidy levels • The findings of this model can be summarized as follows: • For each scenario the decrease of the subsidy produces a decrease in the amount of used land and in the amount of water used. • Water and agriculture La costa de Hermosillo The Method of analysis Results Conclusion

15. Introduction • The use of real tariff in water is not enough for reducing water use until the level in which it is equal to the carrying capacity. • The decrease in land and water use is bigger that decrease in the farmer total income. • This suggests that farmers adapt their crop allocation toward more profitable crops and with those with higher yields. • Water and agriculture La costa de Hermosillo The Method of analysis Results Conclusion

16. Introduction • Water and agriculture La costa de Hermosillo The Method of analysis Results Conclusion

17. Introduction • Water and agriculture La costa de Hermosillo The Method of analysis Results Conclusion

18. Introduction • Water and agriculture La costa de Hermosillo The Method of analysis Results Conclusion

19. Introduction • The reduction in the subsidies to the price of electricity price may play an important role in water preservation • However the price of electricity can’t alone achieve the objective of water reduction. • Increase the pressure on superficial water • Use substitutes to extract the water • Water and agriculture La costa de Hermosillo The Method of analysis Results Conclusion