Irrigation policy is an output of the political process and for execution thereof institutions are created. Political reform and democratic constitutional change is a pre-requisite for adjustment of water institutions. Inalienable individual property rights must be protected and powers of government must be constrained. Public provisioning and financing of irrigation water must be based on common law requirements and willingness to pay. Policy options and institutions for voluntary negotiations and mutually beneficial agreements in the market process deserve preference. Legislative prescriptions must only prevent impairment of third-party interests.Individuals with conflicting interests must have decisionmaking powers. This requires unattenuated property rights. Depending on hydrological conditions, a structure of prior appropriation and riparian water rights must be accepted. Entrepreneurial decisions in the market process must be encouraged through complete definition, enforcement and trading of rights on actual water use and also specification of accountability for water quality changes. Continued government involvement involves support services to facilitate private decisionmaking with acceptance of public accountability.