"The 163 MW project has been conceived in such a way that the water flow to the famous Athirappally waterfalls and also from the proposed dam to powerhouse would not be affected in any manner," Vijayan said in the state assembly while replying to a calling attention on the issue.
"Not a drop of water will go waste with the project," he said.
The project is planned in Chalakudy river in Thrissur district.
The Central Environmental Appraisal Committee has expressed satisfaction on the recommendations of the Environment Impact Assessment report on the project, he said.
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However, with environmental outfits and some political parties expressing objection to the project, government is trying for a consensus by protecting state's interests, he said.
Vijayan also informed the House that the project has received all legal clearance, including Economic and Technical from the Central Electricity Authority.
Referring to recent reports that government had started work on the project by setting up transformers in the area, Thomas said it was not a project that has to be started with "secrecy."
Local people were told that the transformers were to provide electricity for a crematorium in the area, he said and wanted government to make its stand clear on the project.
Congress leadership in the state was also divided over the issue as former chief minister Oommen Chandy had stated that a consensus has to be arrived at over the project while Opposition leader Ramesh Chennithala had wanted the government to drop the project.
The project came into focus recently after power minister M M Mani had said that preliminary works on the project had begun.
Reports that the Kerala State Electricity Board had put up a transformer in the project area fuelled speculation that the government was going ahead with the project despite protests from environmentalists.
The project was mooted years ago, but ran into trouble and was kept in abeyance by successive governments due to protests from local people and environmentalists.