Claiming that his government is "pro-farmer", he said the government would not force any farmer to take his land back which was acquired for the project.
Giving reasons for denotifying the land, the chief minister said the project, on which the government had spent more than Rs 300 crore nearly 10 years ago and acquired over 1,000 acres of fertile land, is irrigating only about 300 acres, that too only during kharif season.
He said the government would appoint a committee to which the land owners may apply seeking damages for restoration of land.
Opposition Congress and INLD have slammed the Khattar government for scrapping the canal project, claiming it was anti-farmer decision.
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However, Khattar, while dismissing opposition charges, said in 1985, the scheme envisaged to supply 590 cusecs water round the year to irrigate 46,717 hectare land by using surplus Ravi Beas water on completion of Sutlej Yamuna Link (SYL) canal.
The Chief minister said the CAG in its 2013 report had observed that the scheme as unfruitful since the primary objective of irrigation was not being by fulfilled.
"Now the Punjab and Haryana High Court has ordered enhancement of compensation rate for 167 acres of land acquired for which payment of nearly Rs 580 crores more is required to be made," he said.
Meanwhile, Khattar said currently, compensation is given in case of damage to houses due to floods and damage to personal properties due to fire.