JSW Energy has proposed to top a bid by Adani Power, led by billionaire Gautam Adani, for a thermal power plant, two sources with direct knowledge of the matter said, as India looks to drum up investment in coal-fired power.

The tussle for the 1,980-megawatt plant in central India, ensnared in insolvency proceedings, comes after the power minister called last November for more private investment to meet a dramatic rise in electricity demand.

In a letter, JSW Energy has asked India's insolvency court to allow it to participate in an auction for the Amarkantak project, said the sources, who sought anonymity as they were not authorised to talk to media.

JSW has offered a better value than Adani's bid, added the sources, who are aware of the letter, which has not been previously reported.

"Adani Power, with its revised offer, looked the best suitor so far," one of the officials said.

The official was referring to a bid of 41 billion rupees ($494 million) the company made last month, just as the insolvency court prepared to give final clearance to another bid from the lenders to the project.

Adani Power's bid, an increase from a previous offer of 29.5 billion rupees, exceeds the bid of 30.2 billion rupees made in Dec.2022 by state-run lenders Power Finance Corp (PFC) and REC Ltd.

Adani Power did not respond to Reuters' query while a spokesperson for JSW Energy did not offer comment.

Private investments in coal-based power in India started dwindling after 2018, hit by lower demand and an ambitious national thrust in renewable energy.

Now the Amarkantak project goes up for a fresh auction ordered by the insolvency court, which has limited participation only to those who had put in financial bids.

Adani Power's revised bid will form the base price for the auction, the two sources said.

JSW, which had not put in a financial bid despite submitting an expression of interest early in the insolvency process, was excluded from the auction and is now seeking court permission to join it.

Reuters could not determine how much JSW intended to bid for the partly operational project, which belongs to insolvent industrial group Lanco and is located in the central state of Chhattisgarh.

It is one of many distressed coal-fired private power stations mired in insolvency proceedings in recent years as owners did not have fuel supplies or the funds to complete them. ($1=83.0050 Indian rupees) (Reporting by Sarita Chaganti Singh; Editing by Clarence Fernandez)