Water Scarcity, Mountain Deforestation and the Economic Value of Water in a Small-Scale Irrigation System: A Case Study in East Java, Indonesia

The purpose of this study was to identify the willingness of farmers to pay for small-scale irrigation (SSI) and its determinants. Additionally, this study analysed the physical water availability in the study area using 16 years’ (2004–2019) historical data of streamflow, rainfall and forest cover change. A structured questionnaire was used to collect the data from 100 farmers. A contingent valuation method was employed to elicit farmers’ willingness to pay (WTP) for irrigation water. The results show that the average WTP of farmers is US$ 215.84/ha/year. It accounts for 20% of farm revenue and is almost 20 times the water fee in large-scale irrigation systems. The study area experienced significant deforestation in the last two decades suffering a decrease of 11.72% of forest cover. It decreases the amount of stored rainwater and decreases the streamflow causing water scarcity during the dry season. Farm size, farmer income, distance to a small dam and usage of water-pump are the significant determinants. The results indicate that water scarcity caused by poor infrastructure increases the economic value of water in a SSI system.