The official name in the original records is Mullai Periyar Dam with coordinates 9°31′43″N 77°8′39″E, located 3900 feet above mean sea level on the Western Ghats in Thekkadi, Idukki District of Kerala, India. The construction work on a small dam began in 1850 but was abandoned. This was because of fever among workers and demand for higher wages. In May 1882, the work on the dam resumed and was entrusted to Major John Pennycuick. It's total estimated cost was Rs. 84.71 lakhs. The reservoir was to have a height of 152 feet and a capacity of 10.56 thousand million cubic feet. The first dam was built by the British Corps of Royal Engineers. After the first dam was washed away by floods, a second dam (the present one) began to be built in 1887 and was completed in 1895. It is built with stone and Surki (A mixture of sugar and Calcium oxide). The height was 155 ft and length 1200 ft. The capacity of the dam was 443.23 million cubic meters. The dam's purpose was to take the water from the reservoir through a tunnel cut across the watershed and Western Ghats to Vaigai basin for irrigation benefits in 68558 hectares of the arid rain shadow regions of Theni, Madurai District, Sivaganga District and Ramanathapuram districts of Tamil Nadu.

On 29 October 1886, a lease indenture for 999 years was made between Maharaja of Travancore, Vishakham Thirunal and Secretary of State for India for Periyar irrigation works. The lease agreement was signed by Dewan of Travancore V Ram Iyengar and State Secretary of Madras State (under British rule) J C Hannington. This lease was made after constant pressure on Travancore King by the British for 24 years. The agreement was to give 8000 acres of land for the reservoir and another 100 acres to construct the dam. The annual tax (rent) was Rs. 5 per acre. When India became independent, the lease got expired. After several failed attempts to renew the agreement in 1958, 1960, and 1969, the agreement was renewed in 1970. According to the renewed agreement, the annual rent per acre became Rs. 30 and hourly cost of each kilowatt of electricity generated in Lower Camp using Mullaperiyar water became Rs. 12. This agreement was entered into without the consent of the Legislative Assembly of Kerala and it expired in 2000. However, for the last 50 years, Tamil Nadu has been using the water and the land, paying Rs. 250,000 as tax, for the whole land, and Rs. 750,000, as surcharge for the total amount of electricity generated, for the past 50 years. At present, the annual amount that Tamil Nadu pays Kerala for the water is Rs.3, 000, 000 and the amount that Tamil Nadu gets from the people of Tamil Nadu who use this water is more than Rs. 12, 000, 000, 000 (1, 200 crores).

The Water Resource Ministry of the Central Government, in para 3 of its official report on Mullapperiyar Dam issue, says the following about the beginning of the issue: “In 1979, reports appeared in Kerala Press about the safety of Mulla Periyar Dam. On 25th November, 1979 Chairman, CWC held discussions at Thirvananthapuram regarding strengthening Periyar dam with officers of Irrigation and Electricity, Department of Kerala and PWD of Tamil Nadu. In the meeting, emergency measures to be completed before next monsoon (1980), medium term measures and long-term measures for strengthening of Periyar Dam were decided. One of the emergency measures was to keep the shutters of spillway raised fully to lower the reservoir level to 136 ft.”

Meanwhile, the Tamil Nadu government had increased its withdrawal from the reservoir, with additional facilities to cater to the increased demand from newly irrigated areas. Still it said that the crop losses to Tamil Nadu, because of the reduction in the height of the dam, between 1980 and 2005 is a whopping Rs. 40,000 crores and that the farmers of the erstwhile rain shadow areas in Tamil Nadu who had started a thrice yearly cropping pattern had to go back to the bi-annual cropping. However, the Kerala Government maintains that this is not true. During the year 1979–80 the gross area cultivated in Periyar command area was 171,307 acres (693.25 km2). Actually, after the lowering of the level to 136 ft (41 m), the gross irrigated area increased and in 1994–95 it reached 229,718 acres (929.64 km2).

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