Are farmers willing to pay for groundwater irrigation? Insights from informal groundwater markets in Western Uttar Pradesh, India

The unregulated use of groundwater for irrigation has led to declining water tables since the extraction rate is more than its recharge. As informal groundwater trading for irrigation has been prevalent in Western Uttar Pradesh, India, for a long time, there is a potential of introducing an organised groundwater irrigation market. Creating a hypothetical organized groundwater market, by following the contingent valuation approach, the present study evaluates the farmers’ willingness to pay (WTP) for groundwater irrigation and the factors determining the same. By collecting primary data from 300 farm households through an interview schedule, the study follows an iterative bidding method for eliciting the farmers’ WTP for the direct use-value of groundwater. The Heckman two-step model is used to estimate the average WTP and its determinants in order to mitigate the impact of sample selectivity bias. The results show that most of the farmers (86%) are willing to contribute to irrigation water reforms in the form of organised water market. The estimated value of WTP for groundwater irrigation is found to be INR 39.30 per hour in the case of 7.5 horsepower tube-well. Moreover, factors like the administrative block, education, social group, land size, primary crop, perception on water scarcity, and perception on water meters significantly impact the maximum WTP for groundwater irrigation. Interestingly, the WTP of tube-well owners who are not involved in groundwater trading is found to be 23% lower than that of groundwater buyers who are primarily marginal and small land holders, implying that even resource-poor farmers are willing to pay higher prices, if reliable groundwater irrigation is ensured. •Declining groundwater levels due to unregulated extraction by private tube-wells.•Regular assured supply of groundwater is critical for farmers’ willingness to pay.•Farmers’ education, social group, land size, and perception impact WTP bid levels.•Trust deficit on government system discourage farmers’ participation for WTP bidding.