Hyderabad: In a major setback to Andhra Pradesh government, the state High Court has suspended its orders cancelling the tenders of Polavaram project.

State Power Generation Corporation, in its orders of August 14, had terminated the contract of constructing Polavaram Hydel power project awarded by the earlier government to Navayuga Engineering Company Ltd (NECL).

On a petition moved by the Navayuga Company challenging the decision, the High Court on Thursday suspended the government order and directed it not to go ahead with the fresh tender process.

The Jaganmohan Reddy government, as part of reviewing all the major decision of the previous Chandrababu Naidu-led regime, had cancelled the Polavaram project tender awarded to NECL, alleging irregularities in the process. The contract was worth Rs49.70 billion (Dh182 million).

However, the company approached the High Court alleging that the government’s decision was mala fide. The petition pointed out that under the new tenders the government wanted the project to be completed in 58 months while NECL was committed to complete it by November 2021. Pointing out that it had made considerable investments in the project, the company pleaded that the pre-closure of the contract will lead to huge financial losses and will also harm its reputation.

Advocate General S Sriram, representing the state government, defended the decision arguing that the fresh tenders will reduce the cost of the project. However, high court did not agree with him and suspended the government order. The court will pass the final judgement in the matter after further hearing of the case.

Despite strong objections from the Polavaram Project Authority as well as the federal government, Jagan had pressed ahead with the fresh process of calling tenders for the same project.

Reacting to the court decision, leader of opposition Naidu said that the “foolish action of the state government” would result in long-term impact and delays in the execution of the project. In a chat with the media in Vijayawada, Naidu said the government had tried to project the contract in a bad light by alleging non-existing corruption.