The Government today approved the proposal to set up Neyveli Lignite Corporation’s Rs 5,907 crore lignite-based thermal power project in Tamil Nadu.

“The Cabinet Committee on Infrastructure has approved the proposal for installing 1000 MW lignite based thermal power project at Neyveli,” said an official statement.

The power generated from the new project will cater to demand of the States in the southern part of the country, the statement said, adding that the project consisted of two units of 500 MW each.

The foreign exchange component of the power plant is Rs 969.81 crore, it said.

NLC is planning to set up a 2x500 MW project in Cuddalore district of the State.

The project had also come up for discussion in the public investment board in November last year, the company had said.

NLC is operating three thermal power stations at Neyveli and one at Barsingsar in Rajasthan with a total installed capacity of 2,740 mega watts.

Earlier, the company has said it plans to set up a 4,000 MW capacity ultra mega power project at Cheyyur in Tamil Nadu’s Kanchipuram district.

NLC and Tamil Nadu Electricity Board would set up a coal-based thermal power plant at Tuticorin at a cost of Rs 4,910 crore.

The plant would have two units each of 500 MW capacity and is expected to be commissioned in 2012—13.

The company shares closed at Rs 103.90 a piece, up 2.36 per cent from the previous close on the Bombay Stock Exchange.