However, it will conduct an entirely new study of the dam in the hope that this will reduce the mounting intensity of current anti-dam protests.
Deputy Prime Minister Plodprasop Suraswadi, in his capacity as Water and Flood Management Commission (WFMC) chairman, said Wednesday the WFMC will not use the department's proposal and environment and health impact assessment (EHIA) study following fierce resistance by environmentalists.
He said the WFMC has commissioned ITD Power China Joint Venture Co to design and construct the dam instead.
ITD Power China JV won five modules out of nine under the government's 350-billion-baht flood and water management scheme, with a total value of 110 billion baht.
Under the new study, he said, the purpose of the dam will shift from irrigation to flood prevention, cutting the construction cost to less than the 13 billion baht under the RID study.
Mr Plodprasop said the new EHIA can commence as soon as the public hearings on the 350-billion-baht water management scheme are finalised in December.
Meanwhile, Sasin Chalermlarp, secretary-general of the Seub Nakasathien Foundation who is a core leader of protests against the dam's construction, Wednesday said he did not oppose the Mae Wong dam but was against its construction in Mae Wong National Park.
Regardless of which study is used, if the dam is built in the national park, his group will still protest, he said, adding that the group wanted authorities to conduct an EHIA in line with academic principles.
If the assessment suggests it will have negative impacts, the dam should not go ahead, he said.
It is still unclear whether the location of the dam under the new study will be the same as in the RID's
Prime Minister Yingluck Shinawatra Wednesday assigned Mr Plodprasop to hold talks with the opponents, including Mr Sasin, of the Mae Wong dam project.
The prime minister's intervention comes amid signs the government is taking a more cautious stance.
Ms Yingluck said the government is willing to listen to public concerns. "The WFMC must pay heed to public views on the project in every dimension," she said. "We do not only want to build the dam. Environmental concerns must also be addressed."
Meanwhile, Santi Boonprakub, secretary-general of the Office of the Natural Resources and Environmental Policy and Planning (Onep), said the WFMC will have to go back to square one if it discards the RID's EHIA.
Onep has requested more details on the RID's EHIA study conducted by a private consultant company.
Mr Santi said that Onep's EHIA experts would conduct a "complete review" of the study before moving on to the next stage. He previously said he would pass the study on to the cabinet as quickly as possible as Onep had no authority to approve the project.
His abrupt change of position followed a 388-km march from Nakhon Sawan to Bangkok by anti-dam activists led by the Sueb Nakhasathien Foundation which has won support from many other environmental and civic groups.
"In my opinion, it is not worth constructing the dam inside the park," Mr Santi said.
"If the government is brave enough, it should move the project to Khao Chon Kan, which is out of the park and can hold more water. All it has to do is enforce the law to evict a large number of people who have illegally occupied the land there," he said.
Meanwhile, about 10,000 supporters of the dam converged on Lat Yao district office in Nakhon Sawan on Wednesday. They have threatened to step up their demonstration if the dam project fails to move ahead.