Autostrade, part of infrastructure group Atlantia, is in a standoff over the licence after the collapse of the Morandi bridge in Genoa in August 2018, which killed 43 people.

The anti-establishment 5-Star Movement, the largest party in Italy's ruling coalition, has been pressing its partners in the centre-left Democratic Party (PD) and centrist Italia Viva group to revoke the Autostrade concession.

"The proposal is insufficient," De Micheli was quoted as saying by La Repubblica newspaper as saying when asked whether Autostrade's offer to cut tollway fees by 700 million euros (597.36 million pounds) as part of a settlement would be enough.

Government sources say De Micheli, a PD minister, is sympathetic to 5-Star's position but her party has resisted the call, arguing instead for renegotiating terms of the concession.

"We would have expected a significant reduction in tariffs at the tollgate without modifying a plan for greater investment in the network and in maintenance," she said.

The government passed measures last year to make it easier and less costly to end the concession ahead of its 2038 expiry.

De Micheli's comments appear to indicate a position that could open the way to the concession being cancelled, which Autostrade has said could force it into bankruptcy and put thousands of jobs at risk.

The 5-Star Movement alleges systematic negligence by Autostrade and Atlantia and points to findings from an investigation into the Morandi bridge collapse that showed attempts to cover up the problems.

Autostrade and Atlantia say they have shaken up management of both groups and made significant efforts to improve controls, including appointing outside inspectors to verify bridge and tunnel safety.

The PD and Italia Viva worry that cancelling the concession would cost billions in compensation to Autostrade, potentially embroiling the state in a long legal battle and hurting Italy's image with international investors.

Underlining the tensions within the government, 5-Star officials repeated on Thursday that fining Autostrade would not be enough and that the motorway concession would have to be cancelled and road tolls cut.

"Revoking the Autostrade concession remains the only solution," deputy Transport Minister Giancarlo Cancelleri of the 5-Star party said in a statement.

Shares in Atlantia, controlled by the Benetton family, have been hit by uncertainty over its motorway unit, which accounts for a third of group core earnings.

Sources close to the company say informal contacts with the government have been maintained in a bid to reach a settlement.

Government sources say Autostrade has offered a total of 2 billion euros to resolve the stand-off, but the offer is considered insufficient by both 5-Star and the PD.

"The famous 2 billion proposed by Autostrade in compensation would actually only be 700 million because there would be 500 million to rebuild the bridge and another 800 million for the Genoa region and the government is taking these items as a given," a coalition source said.

(Reporting by Sabina Suzzi and Giuseppe Fonte, editing by James Mackenzie, Jane Merriman and Alexander Smith)