The cables, made public by Wikileaks, also said the party faction led by Mr Antony, the Kerala unit president, refused to support Mr Gandhi and questioned his "rapid ascent to a position of power" asking "what sacrifices he has made for the party or the country".
On the Guwahati AICC session and Youth Congress conclave, the cables said, Mr Gandhi was the star attraction and he received top billing as the prime mover behind the organisation's revitalisation and as a national leader second only to his mother Indira Gandhi.
"He still may be number two, but Sanjay Gandhi and company keep on trying harder," the cable sent on November 26, 1976 said.
Despite all the fanfare for Mr Gandhi and the Youth Congress, the cables said, US diplomats in Delhi continue to hear and see no evidence that the quality of YC membership "improved measurably".
"Kerala Congress president AK Antony was one of the only leaders to flatly criticise the new Youth Congress and Mr Gandhi.
The other key critic was West Bengal Congress leader Mr Dasmunsi," it said.
The cable went on to analyse that in the next year, in 1977, unhappiness among Congressmen and the organisational ineffectiveness will become an increasing problem.
"... the effect of the Guwahati session has probably been to increase unhappiness inside Congress, increase confidence among Youth Congress leaders and further diminish any air of democracy within the Congress organisation," it said.
In another cable which talks about Mr Gandhi's unpopularity in Kerala, it is said that talks with a variety of people in May 1976 left them with the impression that Indira Gandhi's second son was "not very popular" in the state.
It said newsmen whom they met "resented" Mr Gandhi's "rapid build-up" saying that he was known only for his association with Maruti. The newsmen told US officials that Sanjay was not a politician and that he does not possess any qualities that were needed for political leadership.
"Predictably, the KPCC faction led by state Home Minister K Karunakaran supports Sanjay, as does one section of the Kerala Youth Congress," the cable said.
"The wing of KPCC led by AK Antony and the other faction of the Youth Congress do not support him. Antony and those refusing to support Sanjay question his rapid ascent to a position of power, asking themselves, we understand, what sacrifices he has made for the party or the country," it said.
It said the Kerala Youth Congress is somewhat more radical than the other states and Sanjay's policies are not popular in Kerala.