Despite pressure from the Bush administration, India will contest the $1.2 billion arbitration claim filed by GE and Bechtel for their investment in Dabhol Power Company.

Finance ministry officials, attending the International Monetary Fund-World Bank annual meetings in Dubai, told Business Standard, that an official decision had been taken to fight GE and Bechtel.

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The two companies forwarded their arbitrator's name to the government on September 5.

The Bush administration is exerting pressure on India to settle the Dabhol dispute at the earliest. US Under Secretary of State Alan Larson met Finance Secretary DC Gupta recently.

"The Dabhol issue figured prominently in their meeting," an official said. Larson was unequivocal in telling the Indian government that a drawn out settlement could hamper the flow of foreign investment to the country.

In another meeting, US Assistant Secretary Randal Quarles discussed the Dabhol and International Development Association issues with senior Indian officials.

Additional secretary in the department of economic affairs Prodipto Ghosh is handling the Dabhol issue, an Indian official here said.