The decision was conveyed to the government at a high level meeting convened by Chief Minister Manohar Joshi. Senior officials of the P&O International told the government that in view of the delay, as also owing to strong protest from local villagers, they have decided to withdraw from the project.

``Their contention was that the delay in finalising the terms and conditions for the project, was making it impossible for them to obtain a loan of Rs 1800 crore from the World Bank and therefore, they would like to withdraw from the controversial venture,'' a senior Minister who was at the meeting revealed.

Besides Manohar Joshi, the special meeting was attended by Revenue and Ports MinisterNarayan Rane, Chief Secretary P Subramanian and senior officials of P&O International.

P&O's decision is a blow to the government in more than one way. Not only was it was the first project offered at the Advantage Maharashtra conference held two years ago, it also had blessings of Bal Thackeray, Rane and Joshi.

In fact, after the local residents staged massive demonstrations against the project, Thackeray had deputed Rane to meet the villagers and know the views of the opponents, particularly the fisherman community. Subsequently, both Thackeray and Joshi had publicly declared that the alliance government was committed to implement the project despite opposition from the local residents.

The Minister said now since P&O has unfortunately withdrawn from the project, the alliance government will have to offer the project afresh. ``Now the cabinet will have to take a decision. Under no circumstances, will we abandon the proposal,'' the Minister said, adding, if the government bows to such pressure, thenMaharashtra will be deprived of major investments.The move is also ominous since neighbouring states AP and Karnataka are offering major concessions to lure entrepreneurs, he pointed out. ``We will ensure that entrepreneurs do not rush to these states merely for meagre concessions,'' the Minister added.

When his attention was drawn to the statement of senior Sena leader Udhav Thackeray that the Wadhawan project will be opposed, the Minister said it was his personal view. ``This is not the view of the government and neither did Udhav consult any one in the government before making the announcement,'' the Minister added.

Addressing local villagers on Sunday, Udhav Thackeray had said that the alliance government will not hesitate to abandon the project if they were against it. Besides the opposition from local residents, the Dahanu Taluka Environment Protection Authority set up by the Centre following the directives of the SC had also observed that the project should not be cleared since it will adverselyaffect the ecologically fragile region.

In its comprehensive report, the authority headed by Justice Chandrashekhar Dharmadhikari had observed that the construction of port will be illegal. Following the report, the State Government had taken a policy decision to challenge the report in the High Court on the ground that the authority had exceeded its brief.