P&O Ports, a division of P&O Australia Ltd. announced on Friday that following extensive technical and financial analysis, the company concluded that the development of an all weather port at Vadhavan, in Maharashtra, was not feasible.

India is chronically short of port space

"Our conclusion was based on a number of factors, including doubts as to whether the project would attract the necessary finance, and the uncertainty arising from a decision of the Dahanu Taluka Environment Protection Authority (DTEPA)," Richard Hein, chairman and managing director of P&O Australia said.

The DTEPA, an independent body set up by India's Supreme Court to ensure implementation of the laws protecting the region, ruled in September that the "contsruction of such a mega port in Vadhavan is wholly impermissible and therefore will be illegal".

The proposed site, one of only three in the whole country regarded as environmentally fragile, was described as the "lungs of Bombay." Opponents feared that the development would have led to a great urban sprawl along the Maharashtra coast.

Local residents and fishermen were also at loggerheads with P&O, fearing not only the loss of their livelihood, but furious about the development being planned on the site of a shrine to the god Shiva, where local people pray and scatter the ashes of the dead.

WWF-UK, a conservation group which spearheaded a campaign against the port, welcomed P&O's decision.

"P&O's climb down should send a strong signal to multinationals that investments which undermine the principles of sustainable development will not be tolerated," said Sara Morrison, chairman of WWF-UK.

But many Indian politicians and businessmen were in favour of the port, which they said would have helped maintain the momentum of India's economic growth. Experts estimate that India needs to double the number of ports it currently has.

P&O Ports says that it is disappointed by the outcome of the feasibility study, but remains committed to the development of other ports in India, including the state of Maharashtra.