2. even if that were the case, it's a necessary evil to incentivize lower water use crops. Suppose there were only two types of food, apples and oranges. They both cost around the same right now, but oranges require 10x more water. Raising water prices will raise orange prices, but that's arguably a good thing because it forces consumers to choose more water efficient foods. I don't see how the alternative (ie. continue subsidizing oranges even though they're more costly to society) is any better. Not to mention, you can redistribute the excess earnings back to citizens to make this revenue neutral.
Tangential example: I understand aluminum recycling plants dot the Columbia river because (hydro-electric) power is cheap. In a similar way, water-dependent agriculture and animal husbandry ought to follow the water.
Golf courses, cattle ranchers and almond farmers on the other hand....