The proposal was mooted by the Water Resources Ministry following a Supreme Court judgement in May which directed setting up of the committee.
The three-member committee will be headed by a senior official of the Central Water Commission. One member each from Tamil Nadu and Kerala will be part of the panel.
According to the proposal, the supervisory committee will ensure increasing the full reserve level to 142 feet and look into the safety aspects of the over 100-year-old structure.
Kerala government will provide office space to the committee, but the cost will be borne by the Tamil Nadu government.
The apex court had directed setting up of the committee in May this year while holding the dam to be safe. It had allowed Tamil Nadu government to raise the water level to 142 feet and ultimately to 152 feet after completion of strengthening measures on the dam.
"However, to allay the apprehensions of Kerala - though none exists - about the safety of the dam on restoration of the FRL to 142 ft, a 3-member Supervisory Committee is constituted. The Committee shall have one representative from the Central Water Commission (CWC) and one representative each from the two states Tamil Nadu and Kerala," it had said.
In a major setback to the Kerala government which has been fighting a decade-old legal battle with its neighbouring state, a five-judge Constitution Bench headed by Chief Justice R M Lodha had struck down a law promulgated by it declaring Mullaperiyar dam as endangered and fixing the water level at 136 feet.
Although the dam is located on the Periyar river in Kerala, it is operated by the government of Tamil Nadu which signed a 999-year lease agreement with the former British government to irrigate farmland on its side.