Identifier
Created
Classification
Origin
08CHENNAI394
2008-12-05 07:57:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Consulate Chennai
Cable title:  

ANDHRA PRADESH CONGRESS USES IRRIGATION PROJECT TO WOO

Tags:  ECON EINV EAGR PGOV IN 
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VZCZCXRO9335
RR RUEHAST RUEHBI RUEHCI RUEHLH RUEHNEH RUEHPW
DE RUEHCG #0394/01 3400757
ZNR UUUUU ZZH
R 050757Z DEC 08
FM AMCONSUL CHENNAI
TO RUEHC/SECSTATE WASHDC 1998
INFO RUEHNE/AMEMBASSY NEW DELHI 3418
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
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

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