Pakistani farmers are using groundwater at an increasing rate to supplement their irrigation needs. This practice has led to overexploitation of groundwater in the country, resulting in many negative externalities and increased resource costs. In response to the growing water shortage, the informal groundwater markets in the arid and semi-arid regions of Punjab have gradually emerged. These markets are believed to improve the fair distribution of groundwater and encourage more efficient use of agricultural water. This study aims to investigate these claims through conducting a field survey of 120 farmers that are further divided into three groups i.e. buyers, self-users cum sellers, and self-users (control group). Further, the study employed a Data Envelopment Analysis (DEA) approach to estimate the water use efficiency of all three type of groundwater actors. The study findings show that water buyers are mostly small farmers who do not own tube wells, hence buy water from tube well owners (large farmers). The study also found that groundwater markets improve the equity of water access to some extent, as water is transferred from large farmers to small farmers. The results of DEA analysis show water buyers and water sellers are more efficient in using water than the control group, making buyers the most efficient of all groups. Therefore, participation in water markets appears to be improving the WUE of farmers. The results of single bootstrapped truncated regression show that participation in water markets and access to extension services can improve WUE, while off-farm income and the diesel tube wells can reduce WUE in the study area. However, government could play an important role here through introducing groundwater regulations and improving water use efficiency for sustainable and equitable distribution of water among water users.
Keywords: Data envelopment analysis; Equity; Groundwater markets; Pakistan; Punjab; Water use efficiency.
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