Tata Power Company, part of India's second largest industrial house, is eyeing a controlling stake in the troubled Spectrum Power Generation, which runs a 208 megawatt power project at Kakinada in Andhra Pradesh.

"The Tata group is very keen on the power project and is awaiting the formal invitation for bids. The company will take a final decision after reading the various terms and conditions that will accompany the invitation for bids," sources familiar with the development said.

The two feuding promoters of the project, the operations and maintenance contractor, and the lenders led by the Industrial Development Bank of India are all evaluating the possibility of exiting the project.

The promoters hold a combined stake of around 36 per cent, the operations and maintenance contractor 33 per cent and the lenders 37 per cent. It is not clear at this point whether they will go in for an individual or a combined stake sale when they formally decide to exit the project.

Spectrum Power is one of the few fast-track power projects that has actually seen the light of the day. The project has, however, been dogged by controversy because of infighting between the promoters.

Tata Power is interested in the project as it has a tariff of around Rs 2 per unit. This is lower than the benchmark rate of around Rs 2.50 per unit that has been evolved by banks and financial institutions for funding the project.

Further, when distribution is thrown open to the private sector, Tata Power will have an automatic advantage if it controls the project. This will enable it to supply cheap power and retain customers when competitors try to poach, something the Electricity Act of 2003 permits.