Mumbai: State-run gas utility GAIL (India) Ltd will infuse an additional Rs500 crore into Ratnagiri Gas and Power Pvt Ltd to enable the owner of the beleaguered Dabhol plant clear pending dues of contractors.

The GAIL board has cleared infusion of additional funds to enable RGPPL pay the contractors - Punj Lloyd and its British partner Whessoe - for completing work on the unfinished LNG terminal near the plant, sources said.

The GAIL board had earlier objected to a promoter lending Rs500 crore to RGPPL on the grounds that a public sector firm can only lend to a sister PSU or a rated firm. However, late last month, the board approved the infusion in lieu of rights to match the highest bid for the five million tonne LNG import terminal if it is sold after hiving off from the 2,150 MW power plant, sources said.

GAIL and power utility NTPC had invested Rs500 crore each to take 28.33 per cent stake in RGPPL at the time of taking over Dabhol assets. Maharasthra State Electricity Board and IDBI-led lenders own the remaining equity in the company.

RGPPL had in May 2006 hired Punj Lloyd and UK''s Whessoe to complete the LNG terminal but work had almost come to halt since December, as RGPPL was not paying bills. Dutch marine contractor Van Oord too had been hit by unpaid bills.

The Punj Lloyd-Whessoe joint venture was given a Rs500 crore contract to complete three LNG storage tanks, jetty and regassification facilities, while Van Oord was assigned a Rs66 crore task of dredging the Dabhol port and channel to allow LNG tankers to berth.

The empowered group of ministers (EGoM) headed by external affairs minister Pranab Mukherjee, had asked GAIL to infuse additional funds to clear outstanding bills of contractors who had threatened legal action in case of default.