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Poor quality groundwater can be used conjunctively with good quality canal water to fulfil crop water demand and maximize net annual returns particularly, in the arid and semi-arid regions where good quality soil and water resources are limited. A linear programming model was developed for the optimal land and water resources allocation in order to maximize net annual returns from an irrigated area located in Haryana State of India. Economic and hydrologic factors used in the model were yield, price, and cost of production of nine crops; unit costs of canal water and groundwater; quality of the mixed canal water and groundwater; and net irrigation requirement of crops. The spatial variations in land and water resources were considered through a network of grids. The water production functions were developed and incorporated in the model to estimate the crop yield under different qualities of irrigation water. A groundwater balance constraint was imposed on the model, which mitigate the waterlogging problems, while making optimal allocation of land and water resources. The model results show a reduction in rice, mustard, barley, and gram areas against an increase in cotton, sugarcane, wheat, millet, and sorghum under optimal cropping pattern. Under the optimal land and water allocation, the groundwater use is increased, which in turn mitigate the waterlogging and salinity problems of the study area. The net annual return from the study area has increased by about 26%. The sensitivity analysis of the model parameters shows that the market price of crops is most sensitive parameter followed by the crop area and cost of cultivation. State agencies and farmers involved in the actual agricultural production process are advised to practice conjunctive use of canal water and groundwater to maximize their farm income. This strategy could also mitigate further rise in the watertable without installing expensive drainage systems, which is also not feasible because the groundwater quality is poor and drainage water may pose a serious disposal problem. (C) 2012 Elsevier B.V. All rights reserved.