Full cost recovery or subsidy? The reform dilemma in agricultural water pricing for sustainable development

ABSTRACT Water pricing, often pursued under the goal of getting the prices right, is widely promoted as a pathway to efficiency and sustainability in agricultural water use. However, this long-standing and often polarized debate frequently overlooks the complexities of real-world implementation, where pricing decisions intersect with deep-rooted social, economic, and environmental concerns. Reform advocates argue that subsidies encourage inefficiency, strain public finances, and limit investment in critical infrastructure. Conversely, opponents view such subsidies as necessary welfare mechanisms that support vulnerable communities and safeguard national food security. This analytical review paper critically examines the validity of both perspectives, offering a new conceptual framing that situates the subsidy pricing debate within the emerging context of desalinated water use and broader water governance reform. It investigates whether pricing reforms alone can meaningfully alter water use behavior among agricultural users and what contextual factors shape their success or failure. The analysis suggests that pro- and anti-reform arguments are not mutually exclusive. Artificially low prices are increasingly unsustainable; yet abrupt or poorly designed reforms may be equally harmful. A transitional, context-sensitive approach, combining targeted support mechanisms with gradual reform, offers a more viable path, particularly in settings where full cost recovery may be unrealistic.