February 25, 2005

2005: Highlight # 13

Roughly half of India's irrigated area is serviced by water markets. Nagraj and others look at the intricacies of water markets and crop sharing arrangements in Karnataka...

Economic Analysis of Groundwater Markets in Central Dry Zone of Karnataka

N. Nagaraj, A.H. Suvarna Kumar and M.G. Chandrakanth

The functioning of groundwater markets in hard rock areas of the semi arid dry zone of Karnataka show two types of arrangements. In the first one, irrigation services are provided on demand and water charge is levied on hourly basis. In the second one, irrigation services are provided for the whole crop season, and cash equivalent of a fixed share of crop produce is paid as water charge. For water buyers, crop sharing arrangement yielded higher returns than that under hourly rates. Comparative analysis of allocative efficiencies of input use for sellers and buyers in groundwater markets show that water buyers obtain higher economic efficiency in water used for crop production than sellers, though both buyers and sellers are growing water-intensive crops such as paddy.

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