The paper deals with environmental and social values of river water. Although many decisions on water allocation in river basins are made on economic grounds but environmental and social benefits of water should also be considered in river basin management. The objective of the study is to evaluate the costs and benefits of environmental water allocations, referred to as ‘environmental flows’ (EF). The Menik Ganga (River) in southern Sri Lanka has been used as a case study in order to draw these conclusions. The components of EF evaluated include the requirements of the religious festival, the requirements of the Yala National Park, the requirements of the Pilinnawa Coastal Wetland and the requirements of the Yala Fishery Management Area, off the coast. The analysis shows that it is important to develop economic dimension of environmental flows, if water allocation decision making process is to be strengthened, if the information base for such decisions is to be improved and if the risk of incurring untenable future costs and unnecessary expenditure is to be avoided.
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