The Union Cabinet Thursday sanctioned Rs 356 crore for relocation of the dwellers around the Dal Lake for restoration of its lost glory.
The relocation will check the human interference in and around the lake and also restore its original borders which were encroached upon due to human settlements during last many decades.
An official statement issued said that the commitment for this package was made by Prime Minister Dr Manmohan Singh during his visit to the state last year.
The Housing and Urban Development department which administers Lakes and Waterways Development Authority, had taken up the issue of funding the compensation to be paid to the Dal dwellers for acquisition of their land and structures with union ministry of environment and forests.
"The project has now been cleared after its techno-financial justification," the statement said.
Dal Lake is the tourist hotspot in the heart of capital Srinagar and is dotted by famous Mughal Gardens on its periphery. The lake has been shrinking and dogged by existential problems due to pollution and the deadly red algae.
Tourists visiting Kashmir often stay in hundreds of houseboats moored on the shore.