American energy giant Mirant has pulled out of a $5bn power project in India.

Mirant has cited the slow pace of economic reforms as one of the reasons for cancelling the project - originally planned to be the largest coal-fired complex in the world and the largest power plant in India.

The news follows Enron's lengthy dispute with the Maharashtra state over the price it charged for power and its eventual decision to quit India.

The move can be interpreted as a further blow to the Indian government's attempts to attract foreign investors.

Too uncertain?

The reform of the power sector is at the heart of the government's economic liberalisation package but has so far been fraught with difficulties.

Many companies that moved to India had expected to be operating in a fully liberalised market.

"We believe the projects are sound. We have concluded that there is considerable uncertainty in the market to be able to continue to develop these projects," a Mirant Asia spokeswoman told the BBC's World Business Report.

"By considerable uncertainty we mean such as how the fundamental mechanisms of revenue collection and payment. The mechanism that are required to guarantee that we would get paid for the electricity generated and sold," she added.

The government-owned Power Trading Corp had expected to buy all the power produced by the plant and distribute it over five states in central India.

Part of the problem is thought to have been that PTC would never have been able to pay for this power.

Sole reliance?

Mirant had partnered with India's Reliance Power in the 3,960 megawatt coal-fired Hirma power plant for the coast state of Orissa.

Reliance may yet decide to continue alone or find a new partner. Mirant also plans to pull out of the proposed Balagarh power project in West Bengal and close its office in New Delhi.