Statement I and statement II are independent and contrasting sentences. Statement I provides the information that it had rained enough and statement II states that the water level still didn't cross the desired level. 'In spite of' has a similar meaning to 'although' as they express a contrast between two things. 'Because' is used to introduce a word or phrase that stands for a clause expressing an explanation or reason. Here, 'although' and 'in spite of' are the correct connectors.
Although it rained like cats and dogs this year, the water level has not reached the desired mark in the reservoirs, now they are planning to have any other alternative to meet the regular demand of the people.
In spite of the fact that it rained like cats and dogs this year, the water level has not reached the desired mark in the reservoirs, now they are planning to have any other alternative to meet the regular demand of the people.
Hence, option (c) is correct choice.
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