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The Small Dams Organization has constructed 55 small dams in the rain-fed region of Pothwar Plateau, Punjab in Pakistan. A study was conducted on the Pothwar Plateau during 2019 to investigate the economic importance of small dams in the region, using Khasala and Jawa dams as the case study. The study tasks included: (i) a broad evaluation based on the performance of small dams in Pothwar Plateau, and to analyze the economic benefits of small dams to farming communities; (ii) a comparative analysis of the Khasala and Jawa dams on the Pothwar Plateau to identify the factors that influence agriculture production on irrigated (I) and non-irrigated (NI) farms in the area; and (iii) identification of key issues in order to identify potential options to improve agriculture production on the Pothwar Plateau. Data was collected through field observations, questionnaires, key informant interviews, and formal and informal discussions with farmers and was collated and reviewed quantitatively and qualitatively. It was found that the minimum water pricing is the basic reason for wastage and excessive water consumption. The cost of collecting water-charges from farmers is greater than the water-charges which are received. This has resulted in delayed maintenance of the irrigation systems which exacerbates water losses. It was also found from the survey of farmers of irrigated land and non-irrigated land that irrigation increases wheat yield by 15%, maize yield by 42%, vegetable yield by 41–44% and fodder yield by 60%. The availability of wells on non-irrigated farms means that these farmers could access timely irrigation, otherwise, their productivity gap would be greater if they were forced to rely on rainfall only. Issues of concern which were identified included: (i) illegal diversion of irrigation water by influential farmers; (ii) inadequate maintenance of irrigations systems and (iii) inefficient on-farm irrigation practices which contributed to a total irrigation efficiency in the irrigated areas of less than 30%; (iv) water rights and a water rotation systems are not implemented in the study area and (v) there is no water user association to deal with the water channels in the region which leads to clashes between users over the water distribution. A number of strategies that should be implemented to enhance agriculture production and efficient use of water resources are also identified.