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. Last Updated: 07/27/2016

U.S. Power Firm Quits India, Blaming Red Tape, Lawsuits

NEW DELHI, India -- By pulling out of a $1.3 billion project, U.S. power company Cogentrix Energy Inc. has signaled American investors that it's still tough doing business in India, Washington's ambassador to India said.

"The decision of the board of the company to withdraw from India was a very damaging signal. We reinforce the hesitation that many potential investors feel," Richard Celeste said in an interview published Wednesday in The Times of India.

The company, based in Charlotte, North Carolina, announced last week that it was abandoning its 1,000-megawatt project in the southern state of Karnataka because of delays in getting government clearances and legal wrangles. The Cogentrix project was one of the largest foreign investments in India.

"Cogentrix has become a high visibility case among Americans businesses and the message is not about the power sector, but the difficulty in doing business in telecom, construction and other major infrastructure areas," Celeste said. An embassy spokesman confirmed Celeste was accurately quoted.

Environmentalists had filed a lawsuit alleging noxious emissions from the power plant would destroy the biodiversity of the coastal region and effluents released into the Arabian Sea would lead to a fish famine.

Another suit alleged that Cogentrix had inflated costs that would have cost the government $9.2 billion over 30 years. The also claimed Cogentrix had paid $23 million in kickbacks to government officials for clearing the project.

The Supreme Court on Monday set aside a lower court order and cleared Cogentrix of any wrongdoing related to cost padding, kickbacks and bribery.

Celeste said it would be up to Prime Minister Atal Bihari Vajpayee and the government to "reinforce a positive message about the ability to do business here," Celeste said.