"The government back-tracked on key issues which the Tatas considered as settled as per an memorandum of understanding signed on November 8 last year," said sources.

The Tatas' decision to pull out of the project followed a June 17 meeting in Bangalore at which union civil aviation minister Ananth Kumar made it clear to Karnataka chief minister JH Patel that the status of HAL airport and tariffs to be charged by the Tatas continued to be debatable issues, sources said. Kumar had already declared plans to provide financial assistance to the HAL airport for upgrading its runway. The Tatas, who were briefed later on the outcome of the June 17 meeting, were unwilling to re-negotiate the MoU terms. "The civil aviationministry made it clear that not the peripherals but all the major points of the MoU were to be re-negotiated," sources said.

As per the MoU, signed by the centre, the Karnataka government and the Tata-led consortium last year, it was agreed upon that the HAL airport will deal with only VIP flights and 50-seater planes. It was also decided that the Tatas will be permitted to charge higher tariffs at the new airport than the normal charges levied by the Airport Authority of India (AAI).

However, the centre attempted to re-open all the major terms of the MoU. The centre also brought up an earlier contentious issue of management structure -- whether the airport would be built on Build-Own-Operate (BOO) or Build-Own-Transfer basis -- in the discussion. This was another aspect on which the Tatas refused to re-negotiate. The Tatas had conceded a 10 per cent equity stake to the centre in the MoU in return for the Centre's agreement to a BOO management pattern for the airport. The Tata-Raytheon airport projectenvisaged Rs 3,900-crore investment in two phases. The Tatas had proposed to hold 26 per cent stake in the project, while the foreign partners, Raytheon and Changi Airports Authority of Singapore, were to hold 24.5 per cent stake each.

The Tatas have announced their intention to pull out of the project saying that the project was no longer viable. The group has said that no persuasion can get them back into the project. While Tata officials have refused to confirm any details, it seems that group chairman Ratan Tata has written to JH Patel indicating the Tata-led consortium's decision to pull out of the project.