Explanation:

- Option 1: Daman and Diu

- Daman and Diu is a Union Territory in India but has not been reported as the location for the world’s largest floating solar project as of January 2021.

- Option 2: Pondicherry

- Pondicherry, also a Union Territory, is not known for hosting the world's largest floating solar project.

- Option 3: Madhya Pradesh

- Madhya Pradesh is the correct answer. It announced plans for India's largest floating solar energy project on the Omkareshwar Dam, to have a capacity of 600 MW.

- Option 4: Gujarat

- While Gujarat is an active participant in renewable energy projects, it was not selected for this particular floating solar project.

- Option 5: None of the above

- As Madhya Pradesh is the correct location, this option is incorrect.

Correct Answer: Option 3: Madhya Pradesh