Maharashtra Chief Minister Prithviraj Chavan and Andhra Pradesh Chief Minister N Kiran Kumar Reddy signed the agreement in the presence of Water Resources Minister Pawan Kumar Bansal here.
Under the agreement, a joint inter-state committee will be formed to ensure efficient, speedy and economical investigation and execution of the project on Pranhita river.
To avoid differences between the states at a later stage, it will also decide on the location of the barrage and the share of the expenditure involved for Maharashtra and Andhra Pradesh.
Hailing the agreement as a "trendsetter", Bansal hoped other states will follow suit and matters relating to water- sharing between states will be sorted out.
The project is proposed to be built on Pranahita at an estimated cost of Rs 210 crores to create an irrigation potential of 50,000 acres.
This is a "lifeline" for both the states, particularly the backward areas of Telangana districts where the water from the basin will be utilized for irrigation and drinking, Reddy said.
For national interest, states should come together for better utilization of water, he said.
