Ahmedabad: Australia’s Queensland state government has distanced itself from the funding process for the planned railway infrastructure at Adani Group’s $16.5 billion Carmichael mine and rail projects.

The Queensland government will veto Adani Group’s application for a $1 billion commonwealth loan to build a railway line for the massive mine, the state’s premier Annastacia Palaszczuk was quoted as saying by The Guardian on Friday.

Her remarks represent a potential setback to Adani Group’s plans to raise funding for the rail infrastructure.

The firm refused to comment on the matter. Adani Australia CEO Jeyakumar Janakraj did not respond to calls and messages on his mobile phone.

The Queensland premier’s comments come ahead of elections to be held in the state later this month.

Palaszczuk’s decision, amid her campaign for re-election, came in response to what she believed was a federal coalition plan to “smear" her and her partner, Shaun Drabsch, over his role in Adani’s loan application to the Northern Australia Infrastructure Facility, The Guardian reported.

The move could also have a bearing on the Indian company’s attempts to raise funding from a Chinese entity.

Adani Group is in talks with China Machinery Engineering Corp. (CMEC) for financing, Reuters reported on Thursday, citing two people with knowledge of the situation.

Adani is seeking A$2 billion ($1.54 billion) in outside financing for the Carmichael coal mine, the report said.

Adani, which has already invested $3.3 billion in the project, including buying the bulk coal-handling port at Abbot Point, has battled protests by environmentalists who claim that the project would increase carbon pollution and cause irreparable damage to the Great Barrier Reef marine park in northern Queensland.

The Australian government said last week that it had written to China, backing Adani’s Carmichael coal mine project to dispel “misinformation" being spread by some environmental activists. Australian Prime Minister Malcolm Turnbull has also been facing flak from environmental activists for backing the project.

The Carmichael project is expected to generate 10,000 direct and indirect jobs, with pre-construction work expected to start this year. The group expects to mine 25 million tonnes per annum in the first phase by 2020-2021.

The project, announced in 2010, has already been delayed by at least three years. Last year, the Queensland state department of environment and heritage protection (EHP) issued a final environmental authority (EA) for the project in the Galilee Basin.

In June this year, the Adani Group, headed by billionaire Gautam Adani, said that it was finally ready to proceed with the $16.5 billion Carmichael mine and rail projects in central Queensland.

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