Performance Audit on Kaleshwaram Project, Government of Telangana

A performance audit of the Kaleshwaram lift irrigation project — three barrages, 14 reservoirs, 31 lifts and 1,832 km of canals, tunnels and pipelines across 13 districts, in 7 links and 56 packages — covering how it was planned, approved, funded and executed up to March 2022. The project was created in 2016 by re-engineering the older Pranahitha-Chevella scheme and shifting the water source downstream to Medigadda.

State: Telangana
Audit period: 1 Apr 2016 — 31 Mar 2022
Presented: 15 Feb 2024

Findings

The project's cost is now likely to exceed ₹1,47,427.41 crore against the ₹81,911.01 crore projected to the Central Water Commission; at the likely cost the benefit-cost ratio is 0.52, meaning every rupee spent returns 52 paise, which the audit says made the project economically unviable from the start.
“The cost of the Kaleshwaram Project is now likely to exceed ₹1,47,427.41 crore, as against the cost of ₹81,911.01 crore projected to the CWC... Considering the latest likely project cost (₹1,47,427.41 crore), the BCR works out to 0.52. This means that every rupee spent on the project would yield only 52 paise. It clearly indicates that the project was, ab-initio, economically unviable.”Executive Summary
Of ₹86,788.06 crore spent up to March 2022, ₹55,807.86 crore — 64.3 per cent — was met from off-budget borrowings raised by the project corporation.
“Out of the total expenditure of ₹86,788.06 crore incurred on the project (March 2022), an expenditure of ₹55,807.86 crore (i.e., 64.3 per cent) was met from the off-budget borrowings (OBBs) raised by KIPCL.”Executive Summary
The State never approved the project as a whole — it issued 73 separate administrative approvals totalling ₹1,10,248.48 crore and issued no orders on the funding pattern at all.
“The Government of Telangana has not accorded administrative approval of the project as a whole and instead it has issued separate approvals i.e. as many as 73 administrative approvals aggregating to ₹1,10,248.48 crore; there are no orders from the Government about the funding pattern for the project.”Executive Summary
Against a target of 18.26 lakh acres of new command area, works entrusted covered 14.83 lakh acres and the command area actually created was 40,888 acres as of March 2022.
“Against targeted new CA of 18.26 lakh acres, the works entrusted so far (March 2022) included development of distributary network for only 14.83 lakh acres. The actual command area created so far was 40,888 acres only (March 2022).”Executive Summary
Seventeen works worth ₹25,049.99 crore were awarded before the detailed project report was approved; raising the lifting capacity from 2 to 3 TMC a day added ₹28,151 crore; re-engineering made work already executed redundant, a ₹767.78 crore loss.
“The Department showed undue haste in award of works. Seventeen works costing ₹25,049.99 crore were awarded even before approval of the DPR... The pumping capacity was later increased to 3 TMC per day involving additional cost of ₹28,151 crore. Due to re-engineering of the PCSS Project and changes made in the project works, certain portions of works already executed had become redundant, resulting in a loss of ₹767.78 crore.”Executive Summary
Of the 56 project works, 12 were complete, 40 ongoing and four had not started as of March 2022; the audit says undue benefit of at least ₹2,684.73 crore to pump contractors cannot be ruled out, and a price adjustment clause added after tendering cost ₹1,342.48 crore.
“Out of the 56 project works, only 12 works were completed, 40 works were ongoing while 4 works have not even commenced, as of March 2022... The possibility of undue benefit of at least ₹2,684.73 crore to the contractors for supply and commissioning of pumps, motors etc., cannot be ruled out. Further, post tender inclusion of price adjustment clause resulted in avoidable payment of ₹1,342.48 crore.”Executive Summary

Findings

The project's cost is now likely to exceed ₹1,47,427.41 crore against the ₹81,911.01 crore projected to the Central Water Commission; at the likely cost the benefit-cost ratio is 0.52, meaning every rupee spent returns 52 paise, which the audit says made the project economically unviable from the start.

“The cost of the Kaleshwaram Project is now likely to exceed ₹1,47,427.41 crore, as against the cost of ₹81,911.01 crore projected to the CWC... Considering the latest likely project cost (₹1,47,427.41 crore), the BCR works out to 0.52. This means that every rupee spent on the project would yield only 52 paise. It clearly indicates that the project was, ab-initio, economically unviable.”Executive Summary

Of ₹86,788.06 crore spent up to March 2022, ₹55,807.86 crore — 64.3 per cent — was met from off-budget borrowings raised by the project corporation.

“Out of the total expenditure of ₹86,788.06 crore incurred on the project (March 2022), an expenditure of ₹55,807.86 crore (i.e., 64.3 per cent) was met from the off-budget borrowings (OBBs) raised by KIPCL.”Executive Summary

The State never approved the project as a whole — it issued 73 separate administrative approvals totalling ₹1,10,248.48 crore and issued no orders on the funding pattern at all.

“The Government of Telangana has not accorded administrative approval of the project as a whole and instead it has issued separate approvals i.e. as many as 73 administrative approvals aggregating to ₹1,10,248.48 crore; there are no orders from the Government about the funding pattern for the project.”Executive Summary

Against a target of 18.26 lakh acres of new command area, works entrusted covered 14.83 lakh acres and the command area actually created was 40,888 acres as of March 2022.

“Against targeted new CA of 18.26 lakh acres, the works entrusted so far (March 2022) included development of distributary network for only 14.83 lakh acres. The actual command area created so far was 40,888 acres only (March 2022).”Executive Summary

Seventeen works worth ₹25,049.99 crore were awarded before the detailed project report was approved; raising the lifting capacity from 2 to 3 TMC a day added ₹28,151 crore; re-engineering made work already executed redundant, a ₹767.78 crore loss.

“The Department showed undue haste in award of works. Seventeen works costing ₹25,049.99 crore were awarded even before approval of the DPR... The pumping capacity was later increased to 3 TMC per day involving additional cost of ₹28,151 crore. Due to re-engineering of the PCSS Project and changes made in the project works, certain portions of works already executed had become redundant, resulting in a loss of ₹767.78 crore.”Executive Summary

Of the 56 project works, 12 were complete, 40 ongoing and four had not started as of March 2022; the audit says undue benefit of at least ₹2,684.73 crore to pump contractors cannot be ruled out, and a price adjustment clause added after tendering cost ₹1,342.48 crore.

“Out of the 56 project works, only 12 works were completed, 40 works were ongoing while 4 works have not even commenced, as of March 2022... The possibility of undue benefit of at least ₹2,684.73 crore to the contractors for supply and commissioning of pumps, motors etc., cannot be ruled out. Further, post tender inclusion of price adjustment clause resulted in avoidable payment of ₹1,342.48 crore.”Executive Summary