Traditionally, small dams (tanks) have been both centres of village se
ttlements and the source of irrigation in Asia. Being solely dependent
on local rainfall characteristics and other climatic factors, the wat
er storage behaviour closely follows the rainfall pattern. Carry-over
of storage from year to year is rare because of natural evaporation an
d withdrawals for irrigation. The efficient allocation of storage, wit
hin any year, is analogous to the optimization of a time-varying exhau
stible resource stock. This study attempts to model water storage of d
ams using weekly data with a view to intrayear optimization of storage
. The behaviour of storage is approximated by a dynamic system driven
by rainfall distribution and temperature, and characterized by a linea
r transfer function model following modification of rainfall to allow
for losses. The order of the linear part of the model is identified an
d parameters estimated for three tanks in Sri Lanka using a recursive
estimation procedure. This model can be used for the prediction of sto
rage for a given rainfall scenario. This is demonstrated for past real
istic rainfall experiences' using stochastic simulation of storage.