| Researchers are often confronted with the choice of discount rate as well as the method of discounting for estimating the amortized cost of long-term investment in agriculture including groundwater irrigation. The obvious choice is to use the opportunity cost of capital, which is the prevailing interest rate of around 9 percent (compounded – exponential basis), charged on longterm agriculture loans. However, using the ‘exponential’ basis does not provide a realistic amortized cost of irrigation as it over estimates the value of investment due to ‘exponential’ basis as demonstrated above. In order to obtain an empirical estimate of this interest rate, using field data from farmers three dry agro-climatic zones of Karnataka (Shamsundar (1996), Sripadmini... |
