This report will discuss in great extend, why we must impose water charges, under what conditions water charges are effective, the various methods of water costing using capital cost, O&M costs, the environmental cost and the resource depletion cost, the requirements of an effective irrigation water charge, the legal and institutional framework, the macro-policies that the irrigation project governing bodies must adopt, the factors, criteria and the guidelines to be used for setting the appropriate water charges. The Cyprus experience on water costing and water charging for irrigation water shall be presented.