Though the Hinduja co-promoted project had been issued a counter-guarantee by the Central government last August, it had got stuck with both the coal and railways refusing to sign the coal-supply agreement, arguing that it was biased against them. Under the compensation formula hammered out last month, the finance ministry agreed to bear a large part of the risk emerging from the agreement between the Hindujas, the coal and railway ministries.

Under the agreement, the transportation liability for supplying coal below the minimum 3.9 million tonnes has been finalised at 8 times the freight charges -- the Centre will bear 80 per cent of this risk and the promoters will bear the rest.

In the newformula, the contract with the Hindujas has been signed by the coal ministry, even though the default may be by the Railways. The earlier contract had run into rough weather with the Railways saying that the Railways Act did not allow them to sign a contract in which the potential damages were so high.