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In the State of Uttarakhand, availability of safe drinking water has been a serious problem. In order to tackle the problem, State government installed several rural water supply schemes in the past, but efforts could not yield desired results due to lack of community participation in operation and maintenance of these schemes. Few years back, State government with funding support from World Bank installed Rural Water Supply and Environmental Sanitation Projects with NGOs and community support. The idea was that with the installation of such projects, time used in water collection would be considerably saved which a rural household can utilise in economic activities to earn additional income. The total income, thus, earned would provide an economic advantage when such benefits exceeded the costs incurred in these projects.
The analysis in the paper focused on two issues. (i) The situational analysis of various dimensions of drinking water collection in the State. (ii) The cost-benefit analysis of a rural water supply scheme. The findings revealed that drinking water collection was arduous and a time-consuming activity for the rural households in the State. The economic benefits which resulted due to time savings from rural water supply scheme were higher than the investment made and rural water supply schemes of the Uttarakhand State provided a model of replicability in other hilly areas of the country.