Punjab and Jammu and Kashmir have signed an agreement on the Shahpur Kandi project, where 207 MW power be generated and irrigate 95,000 acre of land for the farmers. The project will also provide a balancing reservoir to enable the upstream Ranjit Sagar dam project. Of the 600 MW installed capacity of the Ranjit Sagar Dam, only 300 MW is generated at a maximum output as the Upper Bari Doab Canal (UBDC) system cannot handle more flow. Also, the water would go waste to Pakistan if the generation is sought to be ubbed. However, with the construction of the Shahpur Kandi dam, a gross storage capacity of 12,071 hectare metre would be provided so it would generate 600 MW at the Ranjit Sagar dam without letting any water downstream of Shahpur Kandi. This water would then be utilised for the fields in Punjab and Jammu and Kashmir through UBDC system and the J&K canal from the Madhopur Headworks in Pathankot.