Water Pricing Policy in Tarim Basin of China

China ranks the thirteenth among countries with serious water shortage problems in the world. The average amount of water owned per person is only 2400 m 3/year, which is about 1/4 of the world average. But unfortunately, the efficiency of water use, especially in agriculture in some arid areas, is very low, only 20%30% in some areas. The main reason is that water prices are too low to protect the water resources. In this paper, the Tarim Basin of southern Xinjiang is selected to study the water supply costs and farmer’s tolerance of water expenses based on a great amount of data collected in the four prefectures in the Tarim Basin. Then, three steps are suggested for water pricing reform in the Tarim Basin. Finally, several possible water pricing patterns are presented, such as water coupons, seasonal floating prices, and water price counting in kind but paying in currency. The conclusion is that the present water price system should be reformed and the water price can be increased to some extent for agricultural use even in Xinjiang, a developing area in China. 