ABSTRACT
Azerbaijan has the highest amount of regulated water resources in Mid East and Caucasus, but water planners have added to these regulated resources without reference to economic criteria. Recoveries of water charges in Azerbaijan are much less than the expenditures. The concept that water enterprise be self-sustainable is quite valid and can be realized either by restructuring and privatization. As transition country, all of population and economy have served by a public sector. Urban water supply and irrigation have become an economic problem because of the generally too low water tariffs. Real scarcity is not taken into account when deciding the tariff. As first step, the existing system can be reformed by commercialization of water services. The decentralization of water charge policy and diversification of the intersectoral water allocation can facilitate progress towards the required reduction of water consumption. The objective of this paper is to discuss issues related to the impact pricing policy on water consumption, especially in the water scarcity conditions in the arid areas.
