The Orissa government has refused to give the proposed 1,000-Mw thermal power project of the US-based power utility AES Transpower in Chhattisgarh a no-objection certificate.
The Foreign Investment Promotion Board had sought a clearance from the Orissa government for the project.
If a foreign company has made an investment in any state in India, that state's "no objection" is required to clear investment proposals by the company in any other state.
AES had entered into an agreement with the Chhattisgarh government in March for setting up a 1,000-Mw coal-fired power project. The project's clearance was pending with the FIPB.
In a letter to the board, Orissa Energy Minister S N Patra cited two reasons while refusing to issue a certificate.
Holding the company responsible for not expanding the Ib Valley project and for not paying dues to Grid Corporation, Patra said, "How can we give it 'no objection' to go ahead with a similar business in another state when it has defaulted in our state."
AES holds a 49 per cent stake in Orissa Power Generation Corporation. The remaining 51 per cent is vested with the state government.
According to the shareholders' agreement at the time of disinvestment in 1999, OPGC was to expand the capacity of its Ib Valley station from 420 Mw by adding two units (unit III and IV) of 250 Mw each.
The proposal was approved by the state Cabinet, following which Chief Minister Naveen Patnaik had laid the foundation stone for the expansion work three years ago.
However, due to a disagreement between the state government and the company over the sale of power from the new units and AES' demand for a review of the existing power purchase agreement with the state-owned Gridco, the expansion is yet to happen.
This apart, AES had taken up power distribution in the state through the acquisition of 51 per cent stake in the Central Electricity Supply Company in 1999.
But it abandoned management of the company in 2002 complaining of huge losses and non-cooperation of the state government in recovery of electricity bills.
The state government has slapped a claim of Rs 800 crore on AES towards non-payment of power dues to Gridco and Rs 173 crore given to the company through a letter of comfort.