Shimla, Sep 4 (IANS): The Himachal Pradesh government Wednesday decided to initiate proceedings against Netherlands-based Brakel Corp. for causing loss to the state exchequer by delaying the execution of a hydropower project.

The cabinet, presided over by Chief Minister Virbhadra Singh, decided to initiate action for damages and penalty against Brakel Corporation NV in the implementation of the 960-MW Thopan-Powari-Jangi project, some 250 km from the state capital.

Official sources said the state government had signed an agreement with Brakel Corp. in 2008, two years after the Dutch company was awarded the project in Kinnaur district, which requires an investment of more than $1,300 million.

The Himachal Pradesh High Court quashed allotment of the project in 2009 as illegal and arbitrary on a petition filed by Anil Ambani-led Reliance Infrastructure, one of the bidders.

Earlier, the cabinet, at its meeting April 23, decided to go for re-bidding of the project. It also decided to reject the representation of both the companies, Brakel and Reliance Infrastructure, to re-allot the project.

Brakel Corp., with a major stake by Gujarat-based power company Adani Power, has already challenged the high court ruling in the Supreme Court. The apex court has listed the matter Sep 16 for the next hearing.

The state government has already decided to forfeit the company's upfront premium of Rs.280.69 crore ($60 million) deposited with the government for delaying the implementation of the project.

Official sources said the government would soon go for fresh bidding of the project as per the state's amended power policy of 2008.

The sources said the delay in the project is costing the state government Rs.250 crore annually. The government could earn this amount by selling 450 million units provided free by the company.

The State Infrastructure Development Board, in an assessment, evaluated the loss to the government due to delay in commissioning of the project at around Rs.1,400 crore, an official said.