Uncertainty and shortages of surface water supplies, as a result of global climate change and flow regulation and harvesting regimes, necessitate development of groundwater in many irrigation management areas. Groundwater can be expensive to pump, but provides a reliable supply if managed sustainably. Groundwater can be used optimally in conjunction with surface water supplies. The use of such conjunctive systems can significantly decrease the risk associated with a stochastic availability of surface water supply.

We propose an innovative nonlinear programing model for the optimisation of profitability and productivity in an irrigation command area with conjunctive water use options. The model, rather than using exogenous yields and gross margins, uses crop water production and profit functions to endogenously determine yields and water use, and associated gross margins, respectively, for various conjunctive water use options. The model allows the estimation of the potential economic benefits of conjunctive water use and derives an optimal use of regional level land and water resources by maximising the net benefits and water productivity under various physical and economic constraints.

The proposed model is applied to the Coleambally Irrigation Area (CIA) in south eastern Australia to explore potential economic benefit of conjunctive water use. The results show that optimal conjunctive water use can offer significant economic benefit, especially at low levels of surface water allocation and pumping cost. At lower levels of surface water allocation the results show that conjunctive water use potentially generate additional AUD 57.3 million. On the other hand, at higher levels of surface water allocation, additional benefit of conjunctive water use is AUD 9.4 million. The model could be applied to analyse the impact of escalating energy prices for groundwater dependent irrigation systems, and other irrigation systems, to maximise the potential of conjunctive water use.