Chief Minister Jagan Reddy is currently in the US and is expected to return on August 24

Chief Minister Jagan Mohan Reddy suffered a major setback on Thursday after the Andhra Pradesh High Court issued interim orders cancelling a pre-closure notice sent to an engineering firm involved in the Rs 58,000 crore construction of the Polavaram Hydel Project. The firm - Navayuga Engineering Limited - had taken the state government to court after its contract was cancelled citing irregularities and non-fulfillment of contractual obligations.

Navayuga Engineering had claimed they had been given time till 2021 to complete the project. The company also attributed delays to the government failing to allot required land.

"This is only an interim order and we intend to continue the fight legally," Andhra irrigation and water resources minister Anil Kumar Yadav said, adding that the government wanted to stop wasteful expenditure of public money.

Last month an eight-member government-constituted committee submitted a 43-page report in which it was alleged that there were problems in the tendering process for engineering, procurement and construction works. The report also said Navayuga had been paid Rs 3,128 crore in violations of prescribed norms.

Mr Yadav had earlier claimed procedures followed by the previous government - led by Telugu Desam Party (TDP) chief N Chandrababu Naidu - were flawed since they allotted work on nomination basis.

On Saturday, after the closure notice had been served to Navayuga, the Andhra government issued notifications for re-tendering Rs 4,900 crore worth of projects linked to the Polavaram mega irrigation scheme. This re-tendering has also been cancelled.

The notifications were issued despite a letter from the centre advising against it.

The centre, including Prime Minister Narendra Modi, has repeatedly opposed the Andhra government's decision to re-tender the projects. Union Jal Shakti Minister Gajendra Singh Shekawat said in parliament the decision could cause further delays and increase costs.

However, on Thursday YSR Congress Party leader Vijay Sai Reddy declared that both the Prime Minister and other central leaders were with the Andhra government on the issue of re-tendering.

The Polavaram irrigation scheme, a mega project on the Godavari River, is one of the most expensive ever undertaken by any state. It was given national status as part of the AP Reorganisation Act, which means the project cost will be borne by the centre.

Chief Minister Jagan Reddy is currently in the US and is expected to return on August 24.