(Insider Stories) - India's Adani Enterprises Ltd. dropped their plans to develop coal railways project in South Sumatera with Indonesian state-controlled coal miner PT Tambang Bukit Asam (PTBA.JK) due to ministerial regulation and rising costs of construction.

Bukit Asam Chief Executive Milawarwa said that the cost of construction is estimated to have risen to $2.4 billion from earlier US$1.65 billion.

He adding, government decision only the miner can build the railway from their mine mouth and restricted the low rank coal export is other reasons.

Initially, the project would have been the first major coal railway built by the private sector in Indonesia.

The deal had paved the way for Bukit Asam to implement its long-held ambition to be among Indonesia’s biggest coal producers.

It produced nearly 14 million tons of coal last year.

Bukit Asam signed an agreement in 2010 with PT Adani Global, a unit of Adani Enterprises and the provincial government of South Sumatra to jointly construct a 250-kilometer railway from Bukit Asam’s mine in Tanjung Enim to Tanjung Api-Api, a port on the Indonesian island of Sumatra.

Once completed, the railway would have been able to transport 35 million tons of coal a year.

The deal would allow Adani Enterprise, led by billionaire Gautam Adani and a part of the Adani Group, to buy 35 million tons from Bukit Asam for at least 30 years.

The Adani Group has said it aimed to generate 20,000 megawatts of electricity by the year of 2020.

Adani, PTBA and South Sumatra province has signed head of agreement to develop Railway and Coal Terminal Project from Tanjung Enim to Tanjung Api-Api with length 270 and estimate can carrying 35 juta tonnes of coal in 2012.

Milawarwa said, after Adani's pulled out from the project,  is studying the possibility of joining with state-railway company PT Kereta Api Indonesia to develop other railway project along the Musi's river in Palembang city.