Kaleshwaram Project: Union Finance Ministry says loan relief only after completion

The Telangana government had requested the restructuring of loans availed for the Kaleshwaram project.

By Sistla Dakshina Murthy
Published on : 4 Aug 2025 6:30 PM IST

Kaleshwaram Project: Union Finance Ministry says loan relief only after completion

Kaleshwaram Project: Union Finance Ministry says loan relief only after completion

New Delhi: The Union Finance Ministry has clarified that any consideration of reducing interest on loans related to the Kaleshwaram Lift Irrigation Project (KLIP) will be taken up only after the project is completed.

Responding to a question raised by Telangana Congress MP Chamala Kiran Kumar Reddy in the Lok Sabha, Union Minister of State for Finance Pankaj Chaudhary provided a written reply outlining the Centre’s stance.

Reworking of loans could affect credit rating, says Centre

The Telangana government had requested the restructuring of loans availed for the Kaleshwaram project.

In its response, the Finance Ministry stated that if repayment schedules are altered or loans are rescheduled, as per Reserve Bank of India (RBI) norms, the loan accounts of the project would be downgraded from ā€˜standard’ to ā€˜sub-standard.’ This could adversely affect the project’s financial standing.

Funding agencies and loan terms

The Ministry noted that Power Finance Corporation (PFC) and Rural Electrification Corporation (REC), both non-banking financial companies (NBFCs), had extended loans to the Special Purpose Vehicle (SPV) established for KLIP.

These NBFCs raise funds through various channels and determine interest rates based on their cost of borrowing. ā€œREC has already extended the project completion deadline to December 2024. Any relief in interest rates can be considered only after the project is completed,ā€ the Finance Ministry said.

A mega irrigation initiative

The Kaleshwaram Lift Irrigation Project, taken up by the previous Bharat Rashtra Samithi (BRS) government, is one of the world’s largest multi-stage lift irrigation schemes. Aimed at irrigating over 45 lakh acres across 13 districts in Telangana, the project was envisioned as a game-changer for agriculture in the state.

The BRS government claimed to have completed most of the project within a record time. However, critics and audit reports raised questions over cost escalations, irregularities in tendering, and the overall efficacy of the project.

Cost of the project and loan burden

The estimated cost of KLIP has undergone several revisions. Initially pegged at around Rs 38,000 crore, the project cost ballooned to over Rs 1.15 lakh crore by the time of completion of major components.

According to official data, more than Rs 80,000 crore was spent during the BRS regime, primarily through loans from various public sector undertakings and financial institutions.

The financial burden of repaying these loans continues to weigh heavily on the Telangana government, which has sought relief in the form of restructuring and lower interest rates.

Congress raises accountability questions

The issue has also become a political flashpoint, with the Congress-led state government demanding a forensic audit of the project, citing possible financial mismanagement. The Centre’s conditional stance on interest relief is likely to intensify the debate over the legacy of KLIP and the fiscal challenges it has posed to the state, irrigation experts opined.

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