Agriculture is the major consumer of fresh water. In Thailand, dry seasonirrigated paddy cropping has expanded, and Thai farmers now face water shortagesduring the dry season. Despite the water shortage, it has been observed that farmerstend to use water wastefully. There are three main factors contributing to thewasteful water use: the fact that irrigation water is virtually provided for free,allowing farmers to over irrigate

farmers' lack of awareness of wasting scarce waterresources

and inefficiency of irrigation systems in delivery of water. It has been argued that water should be fully priced to reflect increasingproduction and environmental costs and scarcity. This research applies the concept offull-cost pricing to the Nong Wai Irrigation System located in the Northeasternregion of Thailand. In the calculation of full-cost prices for irrigation water,Average Incremental Costs (AIC) were used to estimate the marginal opportunity costof irrigation water. AIC figures covering the incremental investment cost andopportunity cost of incremental volume of water are calculated to be 0.24 baht/m3 to1.79 baht/m3. These prices for irrigation water appear relatively low if comparedwith the prices of water for household or industrial use. If the unit prices are multiplied by the irrigation water requirement of paddy,full-cost water charges would be in the range between 376 baht/rai and 4,476baht/rai. A preliminary field test suggests that farmers' willingness to pay forirrigation water is well below the calculated full-cost prices. The result of theinterviews with 23 farmers in the Nong Wai Irrigation area shows that the farmerswould be willing to pay for irrigation water, on average, at the rate of 11 baht/raifor the rainy season and 17 baht/rai for the dry season. These figures may implyfarmers' lack of awareness of water being valuable resources and their resistanceto paying for what used to be fee.