ECONOMIC ANALYSIS OF CONJUNCTIVE USE OF WATER: THE CASE OF MAHI-KADANA IRRIGATION PROJECT IN GUJARAT, INDIA

Canal irrigation systems in India are typically operated so all water demands of farmers are not met. This has lead to private investments in groundwater. Since private well capacity often exceeds the water needs of farm-well owners a significant portion of the ground irrigation water is sold to neighboring farmers at prices much higher than the prices of canal water. Small farmers, who typically do not own wells, purchase well water to augment canal irrigation water.;The evidence based on study conducted in Gujarat, India suggests that the ground water market cannot be characterized neither competitive nor monopolistic. Tradition plays a role in water pricing and well owners do not price discriminate. The relationship between buyers and sellers has many elements of bilateral monpoly. The returns to investments in irrigation wells and distribution systems are comparable to returns in other sectors and are high enough to have attracted a few to invest in wells primarily to sell water.;Farmers who expressed dissatisfaction with canal water supplies and/or were located in areas with poorer supplies use more well water. The most significant impact of conjunctive use is the cultivation of crops of longer duration and of higher value. The use of cash inputs is higher on farms where conjunctive use is practiced. Conjunctive use farms also experienced significantly higher annual gross production and had smaller variation in production compared to farms depending on canal water only.;This study examines the institutional aspects of the ground water market and the economics of conjunctive use. Focus is on farms where purchased ground water supplements canal water. Choice of crops, use of inputs and production on conjunctive farms is compared with farms that use canal water only. Farm level behavioral econometric models are used to explain conjunctive use, use of cash inputs, and gross annual production.