New Delhi The government has decided not to sell the Dabhol power plant, which has been struggling thanks to huge debts it owes to the contractors.

The government asked the National Thermal Power [Get Quote] Corporation to infuse Rs 500 crore (Rs 5 billion) to prop up the project from defaulting on payments to contractors.

The Empowered Group of Ministers headed by External Affairs Minister Pranab Mukhejree, at its meeting on last Thursday decided not to separate the LNG unit and asked joint promoters NTPC and GAIL to run the power plant and LNG terminal as integrated project, an official said.

In order to reduce the debt, the government had earlier considered buying gas from local producer like Reliance Industries [Get Quote] instead of importing costly LNG.

However, the valuation of the import terminal, together with the cost of completing the unfinished portion and building a breakwater, came to over Rs 4,400 crore (Rs 44 billion), much more than the Rs 2,800 crore (Rs 28 billion) needed to build a similar sized new facility.

According to officials, NTPC will infuse an additional Rs 500 crore into Ratnagiri Gas and Power Pvt Ltd, owner of the Dabhol assets, for completing the 2,150 MW power project.

GAIL would find the source of five million tonnes of LNG for the plant while NTPC would operate the power plant. The power plant requires 2.1 million tons of LNG and excess will be sold to other consumers, said an official.

Officials said the additional investment would enable RGPPL to clear dues of Punj Lloyd [Get Quote] and its British partner Whessoe, the contractors for completing the LNG terminal.

The Punj Lloyd-Whessoe joint venture was hired in May 2006 but work came to halt in December, as RGPPL was not paying bills.

RGPPL needs Rs 450 crore (Rs 4.5 billion) for reviving the power plant and Rs 565 crore (Rs 5.65 billion) for LNG works, but it does not have the money to pay the contractors.