This study estimates the economic value of irrigation water in the Pennaiyar River Basin, India, using three production function based approaches: the Residual Value Method, Cobb–Douglas, and Translog functions. The analysis is based on farm level data covering five agricultural years from 2017–18 to 2021–22 for paddy, sugarcane, and other crops across seven districts. The dataset includes input cost components and constructed irrigation water volumes, which are used to quantify the marginal contribution of irrigation water and examine its variation across districts and time periods. Higher economic values are observed in Villupuram and Krishnagiri, where coordinated use of water, labour, and machinery increases productivity. Lower values in Cuddalore correspond to high rainfall conditions, where irrigation contributes less to output. The Cobb–Douglas model provides stable elasticity estimates for water valuation, while the Translog specification captures interaction effects between inputs that influence water productivity. The residual method produces higher estimates under low input and high rainfall conditions, reflecting its reliance on residual output after accounting for observed costs. These results indicate that irrigation water value depends on rainfall conditions, input combinations, and production structure. The findings support targeted policy actions, including the implementation of volumetric pricing in districts with higher marginal water values and investment in irrigation infrastructure, canal management, and groundwater recharge in districts with lower values. The estimated values represent marginal economic values derived from production relationships and do not correspond to observed market prices or administratively determined tariffs.
Singh et al. (Fri,) studied this question.
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