The future of Australia's biggest mining project in remote central Queensland is in doubt after the Queensland Government decided not to facilitate a potential $900 million federal loan.

Indian coal miner Adani's proposed multi-billion-dollar Carmichael coal mine in remote central Queensland would consist of six open-cut pits and up to five underground mines to supply Indian power plants.

Amid political turmoil over the terms of any proposed agreement, Adani had postponed its final investment decision on the project until the State Government gave "clarity" over lower or deferred royalties.

In a decision announced late on Friday, Queensland Cabinet reached an agreement that there would be no "royalty holiday" for Adani and the company would pay full royalties.

Adani had been seeking a $900-million loan to build a coal railway line from its proposed mine site in the Galilee Basin to the Abbot Point coal port.

In a press conference held on Saturday morning, the Deputy Premier Jackie Trad also announced that the Government would not facilitate any loan funds from the Northern Australia Infrastructure Facility (NAIF).

"We have determined as a Cabinet that any money that is sourced from the NAIF for the rail line needs to come directly from the Commonwealth to the proponent, to Adani particularly," Ms Trad said.

"So our position is that the Federal Government should be funding Adani from the NAIF directly and not using Queensland as a middle man."

The ABC understands that would contravene a contract agreement the Queensland Government had signed to facilitate NAIF funds.

Federal Resources and Northern Australia Minister, Matt Canavan, told the ABC the announcement had caused confusion.

"They seemingly cannot get anything right, I welcome the fact that they have finalised a royalty deal but they have now created more confusion by opening up questions about support for the NAIF so they will have to answer those questions I can't," Senator Canavan said.

"It is clear to people in North Queensland that their support for this project seems lukewarm at best."

Adani rail project no longer on track

Tim Seelig from the Queensland Conservation Council said the decision would cast doubt on the project.

"It's actually really big — essentially what the Queensland Government is now saying is that it would not support or administer the funds if they were approved for that loan to the Adani coal mine project for the rail line, so this puts a major spanner in the works now for that federal loan to Adani, which we don't think should be happening in the first place," Dr Seelig said.

"This pushes this whole issue back to the Federal Government and Minister Canavan [is] now to try to figure out what to do next, but I think they're going to struggle really to justify the Commonwealth providing a direct role in providing monies to a private multi-billion-dollar company."

Cabinet's decision also allows for the possibility of a royalty deferral in the first few years, to later be paid back in full with interest.

However Premier Annastacia Palaszczuk would not reveal how much interest would be paid.

"I'm not going to go into those details today because they are matters for commercial negotiation, but as we have said very clearly every dollar will be paid and the interest will be paid, every royalty due to the state of Queensland will be coming in."

The Premier also remained firm on Cabinet's decision.

"This is the best deal for Queenslanders, it's going to be tough negotiations over the next few days but this is the best outcome and I'm not moving from this," she said.

Queensland Opposition Leader Tim Nicholls said the decision put the project at risk.

"I wouldn't be surprised if Adani simply say this is all too hard, I'm sorry Annastacia Palaszczuk you've mucked it up you've created too much uncertainty and we're not going to proceed," he said.

"This is just dumb, quite frankly it's a dumb announcement from a dumb government."

Activist groups welcome move

GetUp campaigner Ellen Roberts was among activist groups to welcome the State Government's decision.

"This means that Adani is not going to be getting those funds on the timeframe that it expected," she said.

"This reflects that giving taxpayer funds is deeply unpopular in Queensland and across Australia and Annastacia Palaszczuk has done the right thing by holding firm to her election commitment not to put taxpayer funds in this rail line."

She said there should be no taxpayer subsidies for the Adani Carmichael project.

"We very much welcome this decision today not to handle these federal funds for the Adani project," she said.

"We're calling on the Federal Government to rule out giving Adani any taxpayer subsidies.

"We know this is deeply unpopular with Queenslanders and with Australians who'd much prefer to have those taxpayer funds spent on schools and hospitals and infrastructure."

In a statement, Environmental Justice Australia lawyer David Barnden said the Commonwealth could not legally fund projects through NAIF without the provision of the states.

"We understand NAIF's constitutional limitations mean states must receive the loan money and the states legally become the lender to the project proponent," Mr Barnden said.

"Arrangements for NAIF funding are governed by a master facility agreement signed by the states and NAIF."

"That agreement has been described as a 'pass-through' agreement, which means Commonwealth money would flow from NAIF to Queensland, then on to the project proponent."

Mr Barden said under the current legal framework, Adani's railway line could not receive NAIF concessional funding if Queensland was not part of the NAIF agreement.

"It appears to prevent a risky subsidy $1 billion subsidy for a commercially unviable rail project," he said.

In a statement Adani said it would give "urgent consideration" to Cabinet's decision and analyse the details when they have been formally provided.