The development achieves significance as PowerGen is trying to sell assets in India to mop up funds. The company's interests to increase its holding in the Tuticorin project to 74 per cent, thus, seem unlikely.

Sources said that the a stalemate has arisen especially after the Tamil Nadu State Electricity Board (TNEB) took an official stand on the power needs of the state. The TNEB has asserted that it is interested only in projects with lowest tariffs.

A Spic official said the company sees no chance of achieving financial closure in the next two-three years. ``We stand nowhere in the race for escrow as there are other power projects which have a better chance,'' he said.

The financial closure for the project solely depends on it getting an escrow. Top company officials said that PowerGen is keen on continuing with Spic as they are presently not incurring any expences on the development of the project.

The officials added that PowerGen will consider raising its stake to 74 per cent only after the power project achieves financial closure.

The project cost is estimated at Rs 2,813 crore. Deferred payment guarantee of Rs 500 crore besides direct equity subscription worth Rs 40 crore were also proposed by financial institutions. The project was expected to attain financial closure by October this year. However, all hopes of the same have been dashed, even as the Industrial Development Bank of India had decided to pick up a minority stake in the project.

The move by financial institutions to pick up a stake in the project would also not materialise now as the condition put forward by FIs was that the project get an escrow.