The state Water Resources Department issued the notice for terminating agreements under which the firm was awarded various works relating to the project being built across the Godavari river.
The move came following report of an expert committee set up in June by the YSR Congress Party (YSRCP) government to probe the alleged irregularities in awarding contracts by the previous Telugu Desam Party (TDP) government headed by N. Chandrababu Naidu.
The TDP government had awarded three different contracts worth Rs 2,915 crore to Navayuga for some works in spillway and spill channel, the power house foundation and other works as part of the mega project.
According to the termination notice sent to the company, the expert committee found that entrustment of part works deleted from original EPC (engineering, procurement and construction) agency to Navayuga on a nomination basis by converting EPC contract to LS (lump sum) contract was not appropriate.
The panel recommended entrusting the works to a new agency by calling fresh tenders and ensuring transparency in the tendering system.
This is the first major contract terminated by the YSRCP government since it came to power in May.
Soon after assuming office, Chief Minister Y.S. Jagan Mohan Reddy had announced that all contracts awarded on nomination basis by the previous government would be reviewed and wherever any irregularities are found, it would go for reverse tendering.
Reacting to the development, Chandrababu Naidu slammed the YSRCP government. "This shows how sincere is the government about completing the project," tweeted Naidu.
The Leader of Opposition said that the TDP government completed 70 per cent of the project despite all odds and false propaganda by YSRCP. He said if 30 per cent works were not completed, the project will remain a dream.
Polavaram, which is estimated to cost Rs 58,000 crore, was declared a national project in 2016.
It is designed to bring an area of over seven lakh acres in coastal Andhra under irrigation besides producing 960 MW power, utilising 273,000 million cubic feet or TMC of water currently going waste into the sea.
( With inputs from IANS )