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Political Economy

Why the Union Govt Cannot Pretend to Be Shocked by the Kaleshwaram Project Now

Government bodies gave clearances and praised the project, while government-run financial institutions extended hefty loans to the very expensive effort. To claim that the Telangana government is singularly responsible for it is wrong.

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Union finance minister Nirmala Sitharaman, during her recent visit to Telangana, made a statement on the Kaleshwaram lift irrigation project. 

Based on a report on The Hindu, Sitharaman made three specific points on it:

a) high interest rate ranging from 8.25 to 10.9% per annum was taken for the project’s construction,

b) the project is so bad that even running its water pumps is not sustainable,

c) the project was grounded without preparing the detailed project report or DPR. This escalated the project cost from Rs 40,000 crore to Rs 1.40 lakh crore.

Exactly 20 days before Sitharaman’s speech, Union Jal Shakti minister, Gajendra Singh Shekhawat, made another shocking statement that the “project lacked statutory clearances and the designs were technically flawed due to which pump houses in three barrages of the KLIS were submerged in recent heavy rains.” 

Indeed, the Kaleshwaram project is very controversial and its cost and benefits, and that fact that its pumps are submerged in water were extensively reported. The two Union ministers appear to now be accepting what civil society in Telangana had been articulating all along – even before the project work stared. The timing and tone of these ministers’ public statements about the project indicates that they perhaps meant to shift the blame solely on the state government led by K. Chandrasekhar Rao, by insinuating that the Union government had no role whatsoever in supporting and approving of this very controversial project.

However, the Union government did have a role in it and could perhaps also have a role in fixing the problem.

‘First in the world?’

The KLIP was started by Congress government as the Pranahita-Chevella lift irrigation project before the establishment of Telangana state in 2014. The present chief minister, KCR, has renamed, reengineered and increased its cost massively.

In addition, the Telangana government floated a Kaleshwaram Irrigation Project Corporation (KIPC) for the purpose of raising loans, so that such loans do not show up in the state budget. 

Also read: Wild Conspiracy Theories Won’t Fix Telangana’s Very Real Problems in Kaleshwaram

The project had initially created euphoria in the country for its massive spending and the speed of construction. The Discovery Channel made a documentary, which looked more of an advertisement for the contractor, on it.

The project, at one stage, became a ‘must visit’ site and was frequented by technicians, politicians, governors and foreign dignitaries. When once section of project was ‘opened’ on June 21, 2019, by then governor Narasimhan, the then chief minister of Maharashtra, Bharatiya Janata Party leader Devendra Fadnavis, was present as special guest. Narasimhan in one of his several visits to the project site, commented publicly that project was “amazing and unprecedented”. In praise of KCR, he said, “I have wondered whether he is Kalvakuntla or kalala [dreams] Chandrasekhar Rao. Now, after seeing the project, I want to call him Kaleshwaram Chandrasekhar Rao.”

The present governor of Telangana, former BJP leader Tamilisai Soundararajan, had termed the project a ‘man made wonder’

CWC calls it an ‘engineering marvel’

The project not only impressed politicians but received massive praise from the likes of the Central Water Commission, a government of India agency within the Jal Shakti ministry, with a specific mandate and function of apprising and approving irrigation projects

A high-level CWC team visited the construction site in January 2018. It included Project Appraisal Organisation (PAO) chief engineer C.K.L. Das, PAO director (south) Mukherjee, CWC director (hydrology) Nityanand Roy and director (cost appraisal) Rajiv Kumar. 

After the visit, Das called it “an engineering marvel and a unique one.”

“We have never come across such a project in the country or outside of it…it is an integrated project that will benefit other projects in Telangana. There are so many pluses to the project,” he added.

That the CWC was fully aware of the project is further evident from the fact that it provided all nine necessary clearances to it.

NABARD too hailed the project

Financial institutions which are supposed to be cautious of any project and its cost benefits, too, were excited about the Kaleshwaram project.

NABARD is one such financial institution which is fully-owned by the government of India and has the stated vision of ‘fostering rural prosperity’. G.R. Chinta, chief of  NABARD, who visited the project, was reported to have hailed CM KCR for “taking up such a wonderful project which would benefit the farming fraternity.”

Even now, NABARD’s website has an article headlined: ‘KLIP has transformed Telangana into Konaseema’.

Punjab National Bank and Andhra Bank also extended hefty loans to the project. 

GOI institutions’ role

The information obtained in response to a Right to Information request filed by one Kareem Ansari revealed that 15 major loans were given by six institutions for the Kaleshwaram project.

Details have it that that the total amount borrowed was Rs 97,449.16 crore.

The breakup of the institutions and number of loans in the brackets and total loan amounts are: 

Financial institution Number of loans Amount (in crores)
Union Bank of India 1 Rs 7,400 
Punjab National Bank Consortium 1 Rs 11, 400
Bank of Baroda 1 Rs 2,150
Power Finance Corporation 6 Rs 37,737.11
NABARD 3 Rs 8,225.97
Rural Electricity Corporation 3 Rs 30,536.08

So more than 90% of the Kaleshwaram project was funded by public sector banks and public sector corporations controlled by the Union government. It was their interest rates, which the finance minister said, ranged from 8.25% to 10.90% per year. 

Burden of re-payments

A repayment schedule for each institution, each month and each quarter, generated with the help of RTI replies, showed that:

  • From 2023-24 to 2034-35, annual re-payments would exceed an average of Rs 13,000 crore. After that, payments continue till 2039-2040 but the amounts would grow lesser.
  • A total of Rs 71,575.42 crore will have to be paid by Telangana state towards interest. 
  • The total re-payment towards the entire loan would be Rs 1,69,022.52 crore.

Thus, Telangana state has to pay more than Rs 13,000 annually for the next 12 years to repay the debt. This is the financial burden on the state, even if the entire project is not able to provide a single drop of water. If the pumps are operated, there would be additional costs.

The cost of water

For this irrigation project, according to its Detailed Project Report, about 13,558 million units of electricity is required to lift water. Based on the current tariff, electricity bills will amount to about Rs 10,000 crore annually. However, independent experts put the figure at Rs 14,000 crore based on pump efficiencies and existing complex agreements between the Kaleshwaram Irrigation Project Corporation and electricity departments.

So, year after year, the project will have to pay electricity bills of at least Rs 10,000 crore in order to lift the water. This is what the Union finance minister had said was not sustainable expenditure.

The Detailed Project Report assumes that 18.2 lakh acre can be irrigated by allocating 144 thousand million cubic feet of water out of the 200 TMC it is expected to lift. As per the crop water requirement data, one TMC of water can irrigate 6,000 acres of paddy crop and close to 10,000 acres of irrigated dry crops. As and when the project delivers this 144 TMC of water, the maximum land it can provide irrigation to is 10 lakh acres – a round figure arrived at by taking into account paddy and some other irrigated dry crops.

The cost of supplying water to each acre would be Rs 250,000, considering entire repayment structure mentioned above. The electricity cost component within this would be more than Rs 100,000. 

The most generous estimate – considering that the project provides water for all 18.2 lakh acres, the system operates as designed without any problems, and water reaches fields without any losses – still puts the cost of providing water per acre at Rs 137,000 per acre. Within that, the electricity component would be Rs 55,000 per acre. This is the most ideal scenario and the minimum cost of water delivery to farmers.

This water is clearly the most expensive irrigation water in the world – for a project approved by Union government bodies and for which the Union government’s financial institutions extended loans.

In order to operate and maintain the system and service the debt, the Telangana government needs at least Rs 25,000 crore per year. Since the KIPC has no revenue and no income whatsoever, the Telangana government will have to spend this from its own budget allocation. The real cost would certainly be much higher than the annual Rs 25,000 crore, considering total spending including government contribution and other costs. This will have serious implications to state and people of Telangana for the next two decades.

Also read: In ‘World’s Largest’ Lift Irrigation Project, Telangana Govt Violates Land Acquisition Laws

From marvel to monster

It is important for the Union ministers of finance and Jal Shakti to be aware of four important points.

a) Their respective ministries and their relevant departments are fully aware of the KLIP and its technical and financial details.

b) A CWC team visited and provided required approvals to the project. Without CWC clearance, the KLIP would not have been constructed.

c) Public sector banks and financial institutions like NABARD too are fully aware of the details about the project and sectioned loans. Without these loans from public sector Banks, the KLIP wouldn’t be existing today.

d) The Telangana government did not construct this project in secret or without the knowledge of relevant authorities. The state government raised these loans flowing all government of India rules through special purpose vehicles, which is common practice.

So the project was built with the full knowledge and support of the Union government.

These two ministers and the Union government, should also be aware that the CWC and NABARD gave approvals and funded the project and praised it in public, in spite of detailed information published by the Telangana civil society about the project.

What can be done?

Normally, in a democratic system, one expects any major allegation on any project of this nature to be followed by an investigation.

The finance minister termed the project a “major financial disaster”. The water resources minister said that the project has “serious technical faults.”

Therefore, the least the Union government can do is to constitute an independent investigation about this project.

Since KIPC, which borrowed Rs 97,000 crores, will never be able to generate revenue to service its debt, it should declared a bankrupt company. If KIPC was a private company, it would go bankrupt immediately. The banks and financial institutions which extended the loans should take responsibility. State sector corporations should at least get the same privileges as private sector ones when financial institutions make deliberate attempts to push loans without proper evaluation.

Civil society should demand that such financial institutions face the consequences for their bad lending.

Dr. Biksham Gujja, is a water management and policy expert who has worked with WWF-International, ICRISAT and UN agencies. His email is gujjab@gmail.com.