The study conducted to know the economics of canal irrigation water and its distribution revealed that the estimated productivity of water at the head region (Rs. 2446.38 million ha cm) of Tungabhadra Left Bank Canal system in Karnataka was found to be lower than that of middle (Rs. 2,778.71 lakh/Million ha cm) and tail (Rs. 2853.03 lakh/ million ha cm) regions. Even though the cost of water distribution has increased considerably over years (Rs. 13.263 lakh/million ha cm in 1984-85 to Rs. 45.758 lakh/million ha cm in 1993-94), it was profitable to invest in canal irrigation since the net returns (Rs. 952.98 lakh/million ha cm) accrued were at higher level. Similarly, as the cost of water distribution (Rs.320.10/ha) was more than the existing maximum water rate (Rs. 250/ha in paddy), there is scope for upward revision of water rate if the farmers are assured of regular and adequate supply of water.