Farmers’ Participation in Informal Groundwater Market in Hard Rock Areas of Peninsular India^§

This paper has analysed the factors that influence farmers’ participation in the informal groundwater market using the Cragg's double hurdle model. For the study, primary data from 171 groundwater farmers belonging to the Eastern Dry Zone of Karnataka were used. The empirical results have shown that agricultural credit and farmers having failed wells positively influence farmers’ probability of water buying. With increasing water cost, the farmers are more likely to purchase or sell water and the quantity of water purchased or sold decreases with the increase in irrigation cost. The well-owners who have drip irrigation and land fragments are more likely to sell water. It has been observed that in the study area farmers purchase water at high prices and hence an effective agricultural water pricing is needed. Another option could be to promote joint investment in irrigation which takes care of credit problems and negative externalities of overdraft, resulting in efficient use of resources.