Application of Econometic Methods for Assessing the Impact of Watershed ProgramsKPalanisamiauthorD SKumarauthorS PWaniauthorWatershed programs in India are contributing to water resources development, agricultural production and ecological balance. Impact assessment of watershed development project includes:(i) developing a framework to identify what impacts to assess and (ii) developing a framework to look after the indicators together and assessing the overall impact of the project. The nature of watershed technologies and their impact on different sectors pose challenges to the evaluation process. More specifically, major challenges include (i) choice of methodologies,(ii) selection of indicators,(iii) choice of discount rate, (iv) quantifying benefits in upstream and downstream,(v) defining the zone of influence, and (vi) extent of natural and artificial recharge conventional methods using financial measures attempt to quantify the impacts in an isolated manner. In order to evaluate the impacts of watershed programs in a holistic manner, the Economic Surplus (ES) approach has been applied. The economic surplus incorporates both consumer surplus and producer surplus. The consumer surplus is the amount that consumers benefit by being able to purchase a product for a price that is less than they would be willing to pay. The producer surplus is the amount that producers benefit by selling at a market price mechanism that is higher than they would be willing to sell for. In the case of watershed programs, producers are mainly the farm households who produce the goods using the benefits of the watershed interventions such as soil and moisture conservation, water table increase and livestock improvement activities and consumers are mainly the other stakeholders in the region, viz. non-farm households representing the labourers, business people and people employed in non-agricultural activities. The ES method is demonstrated using the data from a cluster of 10 watersheds in the Coimbatore district of Tamil Nadu. The distributional effects of watershed programs are also captured through the ES method. The results of the conventional method had indicated that the BCR is 1.23, IRR is 14% and NPV is Rs 567912. The results of the ES method had indicated that the BCR is 1.93, the IRR is 25% and the NPV is Rs 2271021. The conventional evaluation method had thus underestimated the watershed impacts. Hence, possibilities of using the ES methodology in the future watershed evaluation programs could be examined Watershed Management2011Conference or Workshop Item