Android Studio crashes when uses Melos

Question

Flutter project. When AS tries to index project it is broken with exception below. It makes AS useless. It has started after installing Melos.

Dart Plugin - 213.7371 AS - 2021.3.1

java.lang.IllegalStateException: Exclude folder file://C:/Dev/Projects/mobile-websales-git/.dart_tool must be under content entry file://C:/Dev/Projects/mobile-websales-git/.
    at com.intellij.workspaceModel.ide.impl.legacyBridge.module.roots.ModifiableContentEntryBridge.addExcludeFolder(ModifiableContentEntryBridge.kt:111)
    at com.intellij.workspaceModel.ide.impl.legacyBridge.module.roots.ModifiableContentEntryBridge.addExcludeFolder(ModifiableContentEntryBridge.kt:126)
    at com.intellij.openapi.roots.ModuleRootModificationUtil.lambda$updateExcludedFolders$12(ModuleRootModificationUtil.java:168)
    at com.intellij.openapi.roots.ModuleRootModificationUtil.lambda$updateModel$9(ModuleRootModificationUtil.java:134)
    at com.intellij.openapi.roots.ModuleRootModificationUtil.modifyModel(ModuleRootModificationUtil.java:142)
    at com.intellij.openapi.roots.ModuleRootModificationUtil.updateModel(ModuleRootModificationUtil.java:133)
    at com.intellij.openapi.roots.ModuleRootModificationUtil.updateExcludedFolders(ModuleRootModificationUtil.java:161)
    at com.jetbrains.lang.dart.DartStartupActivity.excludeBuildAndToolCacheFolders(DartStartupActivity.java:97)
    at com.jetbrains.lang.dart.DartStartupActivity.lambda$runActivity$2(DartStartupActivity.java:64)
    at com.intellij.openapi.application.TransactionGuardImpl.runWithWritingAllowed(TransactionGuardImpl.java:214)
    at com.intellij.openapi.application.TransactionGuardImpl.access$200(TransactionGuardImpl.java:21)
    at com.intellij.openapi.application.TransactionGuardImpl$2.run(TransactionGuardImpl.java:196)
    at com.intellij.openapi.application.impl.ApplicationImpl.runIntendedWriteActionOnCurrentThread(ApplicationImpl.java:805)
    at com.intellij.openapi.application.impl.ApplicationImpl.lambda$invokeLater$4(ApplicationImpl.java:348)
...