NEW DELHI, Jan. 24 (UPI) -- India says it is working on a scheme to encourage state governments to set up projects using their fuel linkages.

The Power Ministry has not yet finalized the proposal, which is aimed at providing a framework that will enable states to best use the fuel linkages that have been provided to companies, including the state government-owned public sector entities, a ministry official said.

The official said the southern state of Kerala approached the Power Ministry to source coal-based power and, along with other states, is working on a proposal to set up a project in Orissa and later transmit a portion of that power back to the state.

Kerala's initiative for a coal-based power project stems from the extremely low tariff that some of the ultra mega power projects have been able to attract. The government has sought the advice of National Thermal Power Corp. on how to put together such a project, the official said.

The ministry said it will offer the project to the lowest bidder. The capacity limit for any ultra mega power project is 4,000 megawatts, and it uses super critical technology where a unit size is 660 MW and above.