Decks have been cleared to restart the controversial Dabhol Power project in Maharasthra as the company's US promoters withdrew all legal proceedings against the state and the central government before the arbitration panel in London.

A 'consent settlement' was reached between US promoters of Dabhol Power Company -- GE and Bechtel -- and the Maharashtra State Electricity Board and the Government of India ceasing all litigations and legal proceedings for breach of investment protection pacts, sources said on Wednesday.

"The arbitration that took place between GE, Bechtel and the Government of India concluded with a consent award," the sources told PTI.

The two companies had filed arbitration claims worth over $6 billion (over Rs 25,000 crore) at the London panel for breach of investment protection pacts but dropped the cases following agreements with Maharashtra as well the Union government.

No admission of any liability was made in the settlement agreement between GE/Bechtel and MSEB and Maharashtra Power Development Corporation Limited, the sources said.

"Steps are now underway to ensure that Dabhol power plant can be restarted as soon as possible," they said.

Maharashtra Power Development Company Ltd, which controlled 15 per cent stake in DPC, signed a deal with Bechtel last week involving a payment of $160 million to settle its dues. GE and Bechtel controlled the balance 85 per cent in DPC.

IDBI-led Indian lenders had also reached an agreement with GE for $145 million. The dues of overseas lenders have been settled for $230 milllion while that of the US-government promoted Overseas Private Investment Corporation for $220 million.

The 2184 MW plant near Chiplun would be run by Ratnagiri Gas and Power Pvt Ltd, a special purpose vehicle floated by National Thermal Power [Get Quote] Corp, GAIL, Indian financial institutions and Maharashtra State Electricity Board.

Maharasthra witnessed public outrage last month over acute power crisis and protests by opposition Shiv Sena. The generation from the plant could help bridge the over 4000 MW deficit but would clearly be unable to meet the whole demand.