The Industrial Development Bank of India-led consortium will meet the foreign lenders in London on Wednesday for taking over their outstanding dues in the troubled Dabhol Power project.

The meeting assumes importance as the foreign lenders may proceed for international arbitration if the talks fail, sources said.

Although foreign lenders OPIC, Citibank, ABN Amro, CSFB, ANZ Investment Bank, Bank of America, and 19 others have a total outstanding due of over $340 million, sources said the IDBI-led domestic lenders are willing to offer $200-250 million only.

Unless the outstanding dues are taken over, the domestic lenders cannot proceed with the sale of DPC to a new sponsor.

The crucial meet in London follows the meeting of top officials of domestic lenders -- IDBI, ICICI Bank, State Bank of India -- with the Naresh Chandra committee last week.

The Indian lenders were assured of counter guarantee for taking over the outstanding dues of foreign lenders but it will be decided by the new government, sources said.

The financial institutions plan to set up a special purpose vehicle to take over the outstanding dues of foreign lenders of the 2,184 MW power project estimated to cost $3 billion.

The London meeting would be crucial as the lenders could not arrive at a consensus in the earlier meeting in April last week at Singapore.

The lenders had "constructive" dialogue in Singapore but could not arrive at an amicable solution, sources said.

While the lenders are eager to resolve the outstanding debt issue with foreign lenders, moves are also on to look into the technical aspect of Dabhol that is lying idle for over a year.

Once the outstanding dues are taken over, the lenders can negotiate for the 85 per cent equity in DPC held by GE and Bechtel.

The two foreign promoters recently bought the bankrupt energy giant Enron's 65 per cent stake in DPC.