Based on economic considerations like computing cost of irrigation project, its annual operating and maintenance costs, and recovery of capital during its lifespan.

As this method does not encourage cultivators to economically use water, it leads to over utilization of water which in turn leads waterlogging, salinity of irrigated lands, and wastage of precious irrigation water, which ultimately leads to scarcity of irrigation water.

Punjab state abolished water charges for irrigation water supplies on February 1997, as all most all whole population of state is farmers. So, in order to benefit its state farmers and to politically become strong among m government completely abolished irrigation revenue rates or charges in state.

To work out real cost of irrigation waters based on economic considerations, a rate is worked from se considerations. Such a rate, which is worked in terms of rupees per some unit quantity of water, is known as economic water rate.

For some time being or in initial working years of irrigation structures (say 10 years) recovery on fixed capital cost charges as we must first fully rationalize our revenue rates in such a way that we recover annual and maintenance expenditure completely on irrigation structures.

Volumetric method of pricing can be efficiently used in tube well irrigation because process billing can be done on information of a number of units of electricity utilized in running a particular tube well supplying water to a particular society of cultivators.

The specified rates in crop rate system of pricing depending on factors like water requirement of each crop, and earning capacity of that crop.

We cannot expect a complete yield from complete area of crops sown. Due to natural calamities or due to human made mistakes yield of crop may decrease. So, when failure of crop occurs due to reasons which cannot be controlled by cultivators, canal officers have authority to grant remissions to cultivators in full or part.

Economic water rates are higher than rates being charged by government bodies in country. For instance in Gujarat state charged a rupees 0.3 per kiloliter, but only rupees 0.18 per kiloliter is charged by State Tube well Corporation. Similar situations are being faced in states like Orissa, Andhra Pradesh etc.

According to pricing of irrigation water groundnut is priced four times wheat crop even though groundnut uses only one-third of water used by wheat. But groundnut is priced more because reason is that groundnut has a higher earning capacity compared to wheat. So, refore from this we can say that groundnut is a cash crop and wheat is a food crop.