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During the last decade, the concept of water demand management has received increasing attention from both academics and development agencies and banks. In the face of rising costs for supply augmentation and concerns over the apparently inefficient use of water in agriculture, managing demand appears a priority means of mitigating water scarcity problems. Economists, in particular, have used theoretical frameworks to argue for the use of "economic instruments" to provide incentives that may lea d to water saving or enhancing economic efficiency. However, it has become increasingly clear to many practitioners and researchers that evidence from the field shows that the impact of economic tools has fallen short of expectations and promises. Based on an extensive review of the literature and six commissioned case studies, this document demonstrates that there are few examples in which the introduction of water pricing in irrigation schemes has successfully induced water savings. It also sh ows that there is often confusion over the different justifications for water pricing. The objectives of cost recovery and demand management must be understood and addressed separately as their realization requires the use of different charging mechanisms. In most situations farmers could pay the levels of charge required to meet ongoing operation and maintenance and future replacement costs. The widespread failure of farmers to pay is often due to dissatisfaction with the level of service provi ded, lack of confidence in the legitimacy of the charging process and the lack of resources invested in establishing effective and transparent charging mechanisms.
