ANDHRA PRADESH CONGRESS USES IRRIGATION PROJECT TO WOO

UNCLAS SECTION 01 OF 02 CHENNAI 000394 SIPDIS SENSITIVE E.O. 12958: N/A TAGS: ECON EINV EAGR PGOV IN SUBJECT: ANDHRA PRADESH CONGRESS USES IRRIGATION PROJECT TO WOO FARMERS ¶1. (SBU) Summary: The Chief Minister of South India's Andhra Pradesh state recently laid the ceremonial foundation stone for what would be India's largest lift irrigation project. With 437 miles of canals and tunnels, the $7.7 billion project seeks to irrigate 1.64 million acres of drought-prone land in the state. But doubts about the ambitious completion deadline and the availability of electricity for the power-intensive project lead to questions whether the laying of the ceremonial foundation stone was more a matter of election year politicking than actual infrastructure development. End summary. ¶2. (U) On November 28, Andhra Pradesh Chief Minister YSR Reddy laid the ceremonial foundation stone for India's single-largest lift irrigation project. According to media reports, the project will span 437 miles, lifting water from the Pranahita river more than 1600 feet to Chevella, located in the Telangana region's Ranga Reddy district. The ambitious project will require 3,375 megawatts of power to divert 160 thousand million cubic (TMC) feet of water each year to irrigate 1.64 million acres of drought-prone land. It will cost an estimated 7.7 billion dollars and the Chief Minister expects that it will be completed within four years. Project needs lots of electricity but from where? -------------- ¶3. (SBU) An economist with the Andhra Pradesh Energy Regulatory Commission (APERC) told post that the state has not adequately planned to meet the project's massive power requirements. The required 3,375 megawatts represents more than a quarter of the state's total installed generating capacity of 13,000 megawatts, which is insufficient to meet current power demand. According to the Transmission Corporation of Andhra Pradesh, the state assumes that electricity from several thermal power projects that are awaiting natural gas supplies from the Krishna Godavari basin will help meet the irrigation project's power demands. But the APERC economist said the utilities are unaware that the state plans to rely on them to supply the irrigation project. He also questioned the government's assumption that sufficient natural gas would flow from the Krishna Godavari basin in time to supply the thermal plants in question. ¶4. (SBU) The economist also noted that it is unclear who will pay to power the irrigation project. The farmers will not be asked to pay, which leaves the possibility that the cost will be borne by other users through higher electricity prices. It is also possible, he said, that the government would subsidize the cost through the state budget. Another sop to farmers -------------- ¶5. (SBU) The APERC economist said the project will provide water to farmers in the region at no cost. It will eliminate the need for farmers to invest in pumps, saving them $3,000 - $4,000 each. In addition to sparing farmers the initial cost of buying pumps, the irrigation project will also end costly continuing expenditures on repair and maintenance of pumps. All of this, the economist said, will increase farmers' disposable income. (Note: Corn, peanuts, and several minor crops are the primary products grown in this semi-arid zone. The corn and peanuts are not particularly profitable cash crops, while the minor crops are a staple for the region's subsistence farmers. According to Embassy New Delhi's Agricultural Attache, the primary impact of this project is that it could prolong the subsistence existence of farmers who have no other livelihoods options. End note.) Big project = big opportunity for corruption -------------- ¶6. (SBU) Opponents of Chief Minister Reddy's Congress party regularly allege widespread corruption in Andhra Pradesh, particularly in large projects like the irrigation program (reftel). A journalist contact agreed, pointing out the potential for graft in the $7.7 billion project: "the massive project gives ample scope of corruption." Another journalist recently told post that "leakage" to corruption claims three to five percent of the cost of infrastructure projects in Andhra Pradesh. Key official skeptical -------------- ¶7. (SBU) The state's Irrigation Secretary said that completing such a massive irrigation project within just four years is "unheard of" in India. As the official most directly responsible for getting the job done, the Irrigation Secretary was openly skeptical that work CHENNAI 00000394 002 OF 002 could be completed in time and, if it was completed on time, that there would be sufficient power in the state to meet the project's 3,375 megawatt requirement. The journalist also doubted the proposed project timeline, noting that several earlier irrigation projects initiated by this government have fallen far behind schedule. Playing infrastructure politics to woo agricultural vote -------------- ¶8. (SBU) Comment: The project would no doubt be a boon to the poor, drought-stricken farmers of the Telangana region. But we suspect that the groundbreaking ceremony and the announced timeline were more political ploy than an actual statement of the government's intentions. The Irrigation Secretary, a long-time Consulate contact, was surprisingly candid in expressing his doubts about the project deadline. The project will require a big chunk of the state's already inadequate installed power generation capacity, and the plans for additional generation capacity to support it are vaguely developed. Chief Minister Reddy, who swept into office in 2004 on account of his pro-rural policies (including free power to farmers),appears to be making another play at this key electoral constituency with the 2008 state and parliamentary elections just over the horizon. End comment. SIMKIN