The government is likely to approve shortly a counter-guarantee of about Rs 950 crore (Rs 9.5 billion) to enable domestic lenders of Dabhol Power Company to buy out debts of foreign lenders and pave the way for reviving the troubled 2184 MW project, official sources said in New Delhi.

The empowered Group of Ministers, headed by Defence Minister Pranab Mukherjee, is meeting on Friday to accelerate the process of revival of the power plant that has been lying idle for almost two years.

The GoM is expected to approve the counter-guarantee of about Rs 950 crore on a special purpose vehicle, being set up by domestic lenders led by IDBI to buy out the debts of foreign lenders.

"We are expecting that after the GoM meeting, we should be able to kick-start the entire process of negotiations with the foreign lenders. We will never reach a solution through litigations," a senior government official told PTI on Thursday.

The government has adopted a multi-pronged approach to resolve the Dabhol impasse.

The United Progressive Alliance government set up the GoM a few days ago along with an inter-ministerial group comprising joint secretaries of finance, law and power ministries to look into the legal issues.

The problems of the domestic lenders were also being looked into by the Naresh Chandra committee.

There are two main issues plaguing the government and the lenders -- one is the legal part and the other is the process of negotiation with promoters GE and Bechtel, the official said.

"There are about 40-50 cases on DPC pending in Mumbai and Delhi high courts, Maharashtra Electricity Regulatory Commission and lower courts," an official said.

There are 20 other cases that do not directly involve DPC but indirectly relate to it on account of political risks. These cases involve parties like Enron, lenders, Export Credit Guarantee Department of UK and OPIC.

"If we settle the DPC case, all these litigations get settled barring a few related to environment issues and compensation," the official said.

The GoM may also take stock of the legal aspects as the Indian government is preparing to put up the best legal defence against the $6 billion claim of GE and Bechtel.

The two foreign companies had joined erstwhile energy trader Enron Corporation for promoting the first fast-track counter-guaranteed project worth $3 billion. The foreign promoters had filed a huge claim blaming the Indian government for not taking enough steps to prevent closure of DPC resulting in violation of Indo-Mauritian Bilateral Investment Promotion Agreement.

The government has sought 60 more days from arbitration tribunal at London to respond to a claim of about $6 billion by GE and Bechtel, the foreign promoters of the now-defunct Dabhol power project in Maharashtra, as compensation for investment losses.

Certain complications, ahead of the September 30 deadline for filing the affidavit by India before the Tribunal, had developed as its British solicitor firm Evershed withdrew from the case saying it had earlier represented GE in another case.

Indian solicitor firm Fox and Mandal, which was appointed by the UPA government, has already sent the communication to the Tribunal seeking to obtain more time.

Fox and Mandal, in its communication to the Tribunal, cited the change in government at the Centre in May and the consequent change in the legal team which was pursuing the matter.

The London tribunal had given 60 days more to the Indian government recently.

The GoM would also deal with matters relating to the dispute over the invocation of the counter guarantee of about Rs 1,400 crores (Rs 14 billion) given by the Centre, filed by GE and Bechtel and other interested parties.

The finance ministry is actively handling the issues, although P Chidambaram has excused himself from handling any file on the issue as he had appeared for GE and Bechtel before the Supreme Court.