Development of irrigation in India has entailed huge capital investments resulting in a massive canal network which services a little more than 30 million hectares of agricultural land.

Development of irrigation in India has entailed huge capital investments resulting in a massive canal network which services a little more than 30 million hectares of agricultural land. But the physical condition of deterioration has in fact, been sharper since the beginning of the 1980s. This has led to a growing concern over the financial and cost recovery from major and medium irrigation schemes such that proper maintenance of the system can be ensured. State Governments have been incurring increasing losses in the irrigation sector as costs escalate and price of irrigation water remains low.
In this context, the present paper discusses the background of the financial performance of irrigation sector and evaluates its past performance. It also discusses various issues related to capital cost, operation & maintenance cost and cost recovery in this sector. Further, this paper also puts forward certain suggestions for effective financial recovery of this sector, especially with regard to granting of financial autonomy to the concerned agencies and inviting active help from farmers’ organizations.