Top corporate sources who spoke on condition of anonymity said that even Reliance, which had been eyeing the project for long and had been pipped to the post by Marathon, has lost interest in the project since it is widely perceived that Essar itself, after tying up finances for its Vadinar refinery project, is no longer seriously interested in selling the Hazira plant. It may be mentioned that the deal was expected to reduce the Essar group's debt burden considerably and smoothen the way for tying up finances for its refinery project. The group's debt burden to FIs and banks is presently hovering at around Rs 1,550 crore.

The falling through of the deal has also raised questions about the ramifications of the Gujarat government's stand. The government's position on the deal, it is believed, caused the souring of the deal between the two parties.

When contacted, a senior executive of a leading multinational power company, which had earlier been one of the key contenders for the Hazira project, said that while it was a well-known fact that things were not going well between the two partners even after the signing of the memorandum of understanding (MoU), the formal split had still come as a "bit of surprise.""We may look at the project afresh at a later stage but a lot of things have changed over the past months in terms of our own interests," the spokesperson for the MNC said. However, one thing that emerges from speaking to the earlier contenders for the project is that no one is willing to look at the project again till the stand of the Gujarat government on the project is made clear.

It may be mentioned that the Gujarat Electricity Board (GEB), had taken strong objection to the deal struck between Essar and Marathon whereby the latter, after acquiring the project, would continue to supply power to the Essar Steel plant at Hazira at third party concessional rates under a 20-year power purchase agreement (PPA), with GEB and Essar Steel. According to GEB, this would, in effect, mean that Essar would enjoy the benefits of a captive power project even though the deal had been transacted while treating the Hazira plant as an independent power project (IPP) for the Hazira project. The GEB has been demanding that Essar Steel should be made to pay tariffs equivalent to, if not more than, what GEB charges its consumers. The Gujarat government, on its part, has been strongly backing the GEB claim and has been of the opinion that the Hazira sale should be viewed as an IPP sale. "Hazira has not been a typical IPP project from the outset with the Essar Steel angle coming into the picture," a sourcesaid.

Corporate sources said that the Hazira project would be considered seriously by possible buyers now only if it was treated as an IPP project on par with other IPP projects. "We were never comfortable with Essar Steel as a captive, committed customer because first and foremost, any project we look at should be remunerative and financially viable for us. This cannot happen if we are offering concessional rates to any given party," said an informed source.

As of now, Essar has made it clear that it is no longer interested in an outright sale of its plant but would prefer to offload 74 per cent equity stake so that the question of third party sale does not come up at all.