In a written statement, Cogentrix has said Mangalore Power Company has decided to cease development of the project, "As the continued development of the project is no longer feasible." Hong Kong power supplier CLP Holdings subsidiary of CLP Power International is also pulling out of the project along with Cogentrix. The statement says, "We sincerely regret that we are unable to justify further expenditure of resources and time to achieve construction of what would have been a model facility bringing 1,000mw of much needed electricity to Karnataka."

The Mangalore Power company is immediately closing its offices in New Delhi, Bangalore and Padubidri, the statement says. The statement goes on to say that it is in the process of helping its employees find suitable opportunities. Addressing a press conference, top power ministry officials were reluctant to comment on the fallout of decision taken by Cogentrix as the project is sub-judice.

Officials said the decision to pull out will not have any impact on investment in the sector. The private sector has put up 5,000mw of already and another 6,000mw is under construction, which goes to show that there is enough interest in the sector, power secretary VK Pandit said.

Commenting on the future of the project, officials said that it is unlikely that the project will now be offered on the negotiated route. As all projects are henceforth being offered on a competitive basis, this project too will be developed on these lines.

Arguing that the decision by Cogentrix will not affect foreign investment decisions, Pradip Baijal, special secretary in power ministry, said that it must be understood that in the industrialised world some projects will not come up. There is always a time lag between the letter of intent and the completion of a project, inevitably not all reach the finishing post, he said.

A large number of private sector projects have been completed and foreign investors will look at those as well, Baijal said. In 1992, it was decided to open up the generation sector first as there were a whole lot of complicated issues in distribution and transmission, he said. And it was expected that promoters will come forward and take the risks that goes with putting up a project, he underscored.

The 1,000mw coal-fired power plant is one of eight "fast-track" power projects in India and has been under development since 1992. The project was coming up 35 kilometres north of Mangalore. CLP Power International has been involved in the project since 1995. CLP Power International said it remained committed to developing the power market in India. The company, together with the Tata Group submitted a proposal in August and had been pre-qualified to bid for the 2,000mw Pipavav Power Project in Gujarat.

CLP Power International was also considering other investment and project development opportunities in India, it said.