The twin projects, which would cost an estimated $10.8 billion, have received the strong backing of the federal and Queensland governments and were expected to create thousands of jobs.

But according to a new report by the Institute for Energy Economics and Financial Analysis, sinking coal prices and high development costs would make the project prohibitively expensive to supply India’s growing demand for electricity.

“The key point is that retail electricity prices in India are considerably lower than the level required for the profitable generation of imported coal-fired power, particularly when that coal is sourced from isolated deposits with none of the required infrastructure in the middle of Queensland,” said the report authored by Sydney-based fund manager Tim Buckley.

With Indian producers unable to supply enough coal to satisfy local energy demands, India’s Adani Group spent $525 million in 2010 to acquire the Carmichael lease, with rival Indian group GVK agreeing to pay around $1.36 billion to Gina Rinehart’s Hancock Prospecting for a separate lease in 2011.

Both greenfield projects, they would require massive infrastructure investment including rail lines and port facilities in environmentally sensitive areas close to the Great Barrier Reef near Townsville and Mackay.

But since the mining leases were acquired, coal prices have plunged meaning that, on current modelling, Indian power stations fired by coal from the Galilee Basin would have to charge up to 90 per cent more for the electricity.

“The inflationary consequences, both immediately and locked in over the life of (India’s) 15-25-year power purchase agreements are prohibitive,” concludes Buckley in the report.

“Consideration of the deflationary impacts of renewable energy, plus a greater focus on energy efficiency and reduced grid transmission losses, provide an increasingly economically rational alternative.”

Jai Sharda, the co-founder of Indian investment research and advisory house, Equitorials, which conducted the modelling used in the report, said that on his analysis it made zero commercial sense for either company to develop the Galilee mine deposits.

“On a very best case scenario, these projects remain very far from being economically and commercially viable,” said Mr Sharda.

“Even assuming everything went exactly according to plan, these coal deposits remain prohibitively expensive to develop,” he said.

A spokesman for GVK in India hit back hard at the report, saying the company remained fully committed to the project and scoffed at the doubts expressed in the report.

“We remain firmly committed to the development of our Galilee Basin coal assets and we are continuing to develop our projects to a point where construction can commence,’ the spokesman told Fairfax Media.

“If analysts are applying the same cost structures found in other existing regions, such as the Bowen Basin for example, to our large-scale greenfield site, they would clearly get their figures wrong.”

“The mining techniques available to us as a result of the large, shallow and very flat delineation of our coal assets deliver a free-on-board price that ensures our mine is comparatively immune to the volatility of cyclical coal prices.”

With strong demand for coal in the medium to long term expected to create a global supply shortfall in the coming years which GVK’s Queensland assets were uniquely positioned to supply, the spokesman said that even in the current conditions the Galilee Basin assets are differentiated from other mines due to their projected low production costs and sought after coal quality.

“We are continuing to take our projects to a point where construction can commence and we wouldn’t be doing that if we thought the projects weren’t viable,’ the spokesman said.

Adani Group spokesman Mr Roy Paul declined repeated attempts for comment on the report.