The river Karanja, a major drinking water source for the Bhalki municipality is under threat by the disposal of effluents from the industries such as Sugar, Paper and distilleries. To study the effect of effluent disposal on this river, one dimensional steady-state stream water quality model was developed using QUAL2Kw. In this model pre-monsoon data is used for calibration. From the sensitivity analysis, it was observed that the model is sensitive for temperature, bottom width, discharge and biochemical oxygen demand. Simulations were carried out for several scenarios such as bottom algae, head water release, shade and temperature under dry weather flow condition. All these profile did not meet the requirement of minimum DO concentration, to get it bottom algae is to be reduced to 75%, head water BOD is to be reduced to 8mg/L, and shade is to be increased up to 30%. © 2012 CAFET-INNOVA TECHNICAL SOCIETY.