Irrigation plays a critical role in Vietnam’s rural economy and the national food security priority.The Vietnamese government has developed an extensive irrigation system and waived irrigationcosts for farmers to reduce rural poverty. However, excessive use of water in agriculture hasbecome a major concern. It is important to evaluate the value of water in order to encourageeconomical use. We use a multi-model approach and plot-level data to indirectly estimate thevalue of irrigation water and address a majority of issues related to causal identification. Ourresults indicate that farmlands with access to irrigation have significantly higher productivityand land values. The high value of irrigation water in agricultural production is a premise forcompulsory payment for irrigation water. We then investigate the design of Vietnam’s irrigationpolicy and the hazards that have arose from the fee waiver policy. Finally, we explain why thecurrent policy has failed to promote a sustainable long-term solution.