Interior Secretary Cecil Andrus says he will recommend that President Carter veto controversial pending legislation that would provide a massive subsidy to western agribusiness interests drawing water from federal irrigation projects.

Andrus said Friday he was "shocked and dismayed" over a bill recently approved by the House water and power subcommittee that would vastly increase the size of farms eligible for the federal water.

Andrus made his statements as he presented an award to a University of California economist who has been a vocal opponent of water subsidies for large landowners and a frequent cirtic of both White Hose and Interior Department policies.

At the heart of the controversy is a 1902 federal law establishing irrigation projects in the thirsty western states.

The 1902 law placed a 160-acre limit on farms eligible for the federal water, a provision which has been largely ignored. Citing figures showing that only 3 percent of the individuals served by the projects controlled 30 percent of the irrigated land, Andrus changed, "The intent and purpose of the originallaw was essentially swept aside in favor of the privileged 3 percent."

The carter administration has proposed more strict adherence to the limitation provisions while also recommending that eligibility be increased to 960 acres. Andrus and the administration oppose the pending House and recently passed Senate bills.

The secretary admitted after his speech that California's powerful agribusiness interests would be "livid" over a carter veto of the current legislation, and expressed hope that Congress would come up with a better bill.

Andrus' declarations did not mollify critics who have attacked the administration in the past for not being tough enough in enforcing the law on the state's large landowners.

"He makes a great speech, but his actions don't usually follow his speeches," complained George Gallis, head of National Land for People, a group which has long been fighting for strict enforcement of the 160-acre rule.

Even Prof. Paul Taylor, the economist who received the Interior Department's "Conservation Service Award" from Andrus, was guarded in his appraisal of the administration's effort. "i'm pleased with the way they are coming through now," Taylor said, but when asked if he were confident the administration would deliver on its pledges, he told the questioner, "I'm going to pass that by."