Top government sources told The Financial Express that the PMO has now asked the Department of Public Enterprises (DPE) to put up a formal note to the cabinet explaining the need for an extension to the PPP policy with comments from the affected ministries including the power and the finance ministries.

PMO has already sought the views of the finance ministry before writing to the DPE. Sources informed that finance ministry, in its reply to PMO, has conveyed that if at all any extension is to be granted to the PPP policy it should be with a `sunset clause' that this will be the last extension and no further extension would be granted in future. Sources said that the finance ministry is also understood to have recommended slashing the existing limit of 10 per cent price preference to 5 per cent.

The letter dispatched by the PMO to DPE also says that such a matter has never been referred to it before and that it was surprised to find a small and procedural issue like this getting embroiled in an controversy, with the power and industry ministries having strong differences of opinion.

"The PMO has studied all the proposals and has asked the DPE to understand the gravity of the situation and prepare a note for the cabinet to take a final view on this matter", sources said.

Earlier, the finance ministry was fully supporting the power ministry and had opposed the PPP policy extension. In one of its letter to the ministry of heavy industry, the finance ministry has clearly stated that "PSUs should be able to withstand competition as far as price preference is concerned and that there should be no reason for giving any extension to them for tendering in international competitive bidding projects".