Aug. 12 (Bloomberg) -- Kenya announced a plan to tackle a drought which has hit food crop-growing regions, reduced hydro- electricity production and led to widespread water shortages.

The government will spend 24 billion shillings ($314 million) on “drought-crisis interventions” using contingency funds from the 2009-10 budget, borrowing and from “small” cuts to the budgets of various ministries.

“The nation is in a serious water, food and energy crisis,” Prime Minister Raila Odinga said in Parliament in Nairobi today, according to an e-mailed copy of his speech. “Thirst combined with hunger is taking a heavy toll on the lives and health of our people.”

Kenya’s corn production may fall 65 percent below consumption this year, putting 10 million Kenyans at risk of hunger or food insecurity, said Odinga.

In response, a duty waiver on imported corn was extended until June next year, from a previous end-date of mid-January. Farmers will receive free or subsidized fertilizers and seeds to boost their productivity, he said.

Armed forces and police officers will be deployed in 11 districts, which are facing imminent humanitarian disasters, to deliver emergency rations of food, water and medicine for up to three months, he said.

Drought has cut hydropower generation by 46 percent, leading to the start of scheduled power-rationing last week as generation dropped to 900 megawatts. This is 200 megawatts below peak demand, he said.

Kenya will maintain load-shedding until at least mid- October when 222 megawatts of new generating capacity will be added to the grid and the short rains start, he said.

In addition to a program of water rationing which started in May, the government is drilling more boreholes and buying 80 million liters (21 million gallons) of water every day from private owners of water resources, he said.

Most parts of Kenya have suffered from scanty rainfall since last year’s short-rain period, which normally runs from October to December, the country’s Meteorological Department said yesterday in an e-mailed response to questions from Bloomberg News.

To contact the reporter on this story: Sarah McGregor in Nairobi at smcgregor5@bloomberg.net

Last Updated: August 12, 2009 12:11 EDT