The Israeli government on Sunday approved the construction of a massive new water desalination plant to help the arid country deal with a severe shortage.

The construction of the Sorek plant, named after the area south of Tel Aviv where it would be built, is part of an ambitious multi-year plan aimed at using sea water to supply a substantial share of the Jewish state's drinking water.

"In recent years, the Israeli water economy has become caught in a deep crisis," Benjamin Netanyahu said at a weekly cabinet meeting, where the plant was approved.

"Sorek will supply 150 million cubic metres annually. That's about a quarter of the shortfall of water in the state of Israel each year," he said, adding that the plant would cost some 2 billion shekels (530 million dollars).

Media reports said the plant's capacity would eventually be increased to 300 million cubic metres, making it one of the biggest in the world.

Uri Shor, a spokesman for the Israeli water authority, said Israel consumes some 700 million cubic metres a year of drinking water, while agriculture uses 450 million and industry uses 100 million cubic metres.

Israel already has three smaller desalination plants that produce a combined total of 292 million cubic metres of drinking water a year.

Another plant in the southern city of Ashdod is still awaiting final clearance from the government following consultations with environmental and public health groups.

The desalination projects are aimed at lessening the country's dependence on the vastly-depleted Jordan river and the Sea of Galilee, as well as underground aquifers.

"This is an infrastructure project of the highest national importance. Solving the water problem is an integral part of creating the state of Israel's infrastructure base for the 21st century," Netanyahu said.

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