Drought is the one of the important factors that limit the productivity of rice in the fragile environments of South India. The existing modern varieties of rice do not perform well under drought stress conditions. Tamil Nadu Agricultural University (TNAU) has used a number of techniques to develop drought tolerant (DT) rice varieties – conventional breeding, molecular breeding and genetic engineering. So far the most advanced varieties from DT programs – PMK 3, PMK 4, and RMD 1- were developed through conventional breeding and molecular breeding. The genetic engineering research program for DT is not active at present. DT varieties are based on crosses of land races and high yielding varieties with white slender grain quality. In this study we likely welfare effects generated by the adoption of DT varieties at the regional level. For this purpose a farm level survey was conducted among the 120 farm households in major drought prone districts of Tamil Nadu 2008 – 09. All the selected farmers were provided seeds of DT cultivars (PMK 3, PMK4, RMD 1) as a part of on-farm trials managed by TNAU Scientists. The farmers also grew land races and other HY cultivars of rice in their lands during the season. The results from the cost of cultivation and returns of DT, existing land races and HYVs indicate that the adoption of DT varieties would bring additional benefit to the farmers to the tune of 32.82 per cent despite increase cost of human labor and manures by 15 percent. There was a significant reduction in the cost of other input such as seed, chemical fertilizer and machine power. Reduction in cost and higher productivity together benefited the farmers as a result total returns and the net gain over 20 percent.