The effect of sand mining on the economic performance of groundwater irrigation has been studied in the Panruti taluk of Cuddalore district in Tamil Nadu. A comparison of water productivity for different farms-size categories has been done in sand mining and non-sand mining blocks. The cropping sequence, cropping intensity, irrigation particulars, investment pattern on tubewells, use of different HP-motors, etc. have been studied in sand mining and non-sand mining blocks. The study has revealed that due to sand mining externality, the watertable has gone down and to offset this effect, the farmers have been increasing the horse-power of their motors. Thus, investment has been increasing in the sand mining block in all farm-size categories. Its repercussions have been reflected in the economic performance of sand mining block in terms of higher annual cost and unit cost of irrigation. The study has suggested to take necessary steps to augment the groundwater recharge on one hand and imposing restrictions on indiscriminate sand mining on the other hand. The regulation of sand quarrying has also been suggested to streamline the flow of river Malattar.