The Rs 3,866-crore project includes a dam and a canal system. It will benefit 727 villages in the state.
In presence of Madhya Pradesh Chief Minister Shivraj Singh Chouhan and Water Resources Minister Narottam Mishra, the prime minister gave credit to the labourers "who worked hard with tools and machines, sweating it out day and night".
"I have just done the formality of launching the project by pressing the button, but it's actual launch was done when they toiled hard for it," he said.
The project is expected to benefit over 700 villages and it would irrigate 1.25 lakh hectares of land and also provide drinking water to over 400 villages.