Bangladesh industry blames government for Tata withdrawal

August 1st, 2008 - 12:06 pm ICT by IANS  

Dhaka, Aug 1 (IANS) Captains of Bangladesh’s trade and industry Friday regretted Indian conglomerate Tata Group’s withdrawal of $3 billion investment plans, blaming the indecision of successive governments for the scrapping of the offer - the biggest the country has ever received. Anisul Huq, president of the Federation of Bangladesh Chamber of Commerce and Industry (FBCCI), said: “The general people are not clear on the economic implications of the withdrawal of Tata’s investment proposal. This is because the proposal was influenced by politics of our country to a great extent.”

A top government official, however, said it was not possible for Bangladesh at the moment to guarantee the supply of the huge amount of gas required for Tata’s planned projects.

“We would have to stop gas supply to households if we were to guarantee gas supply to Tata,” said Kamaluddin Ahmed, chief of the Board of Investment (BOI) to whom Tata’s resident director Manzer Hossain gave a letter informing that the company was cancelling its plans.

“We’re not frustrated by the Tata move because we have enough energy resources. We’ll be able to attract more foreign investments after the new coal policy is finalised,” Ahmed told the Financial Express.

However, Haq said withdrawal of investment plans by Tata would reflect poorly on Bangladesh and other investors may be put off.

“This indecision on whether to accept the proposal or not and thereby withdrawal of a big foreign direct investment proposal will surely not give a positive signal to the industries. However, it is very difficult to predict what the economic loss for this withdrawal by Tata will be,” Haq was quoted as saying by The Daily Star.

The FBCCI chief also said the government should have taken a concrete decision earlier regarding the Tata investment proposal.

Mustafizur Rahman, executive director of the Centre for Policy Dialogue, said it is discouraging news for the country. “Tata’s investment plan abandonment reinforces the need for a strategic energy and gas position for the country,” he said.

Mamun Rashid, a leading banker and economic analyst, said: “This was being discussed for last several months as the previous government as well as the interim government could not decide on their investment interests. Besides most of the Tata project has critical dependency on timely supply of gas at competitive price, where our domestic position is quite uncertain.”

Bangladesh, with around seven trillion cubic feet of proven gas reserves, claims that it is facing a gas shortage of at least 150 million cubic feet of gas per day, badly hampering industrial production and power generation.

However, Bangladesh’s donors and US-based MNC Unocal wanted Dhaka to export gas to offset the investments made in exploration and thereby make them profitable. India was a ready market.

The issue, however, acquired political overtones and Bangladesh has refused to export gas.

Tata conglomerate chief Ratan Tata’s offer, made when he visited here in 2004, was prompted by a desire to utilise that gas at home and help Bangladesh develop its fertiliser, gas-based and agro-based industries, besides investments in steel and other sectors.

However, Tata’s requirement for gas was more than 200 million cubic feet per day, which could not be met right now, Bangladesh’s Energy Secretary Mohammed Mohsin was quoted as saying by the Financial Express.

Tata signed a memorandum of understanding with Bangladesh in 2004 on a $2 billion investment, which later grew to $3 billion. Its investment proposals include a 2.4 million-tonne a year steel mill, one million tonne a year fertiliser factory, 1,000 MW gas-fired and 500 MW coal-fired power plants.

The government initially rejected Tata’s offer to buy gas at a fixed rate of $1.10 per 1,000 cubic feet or one unit over a 20-year period. It also informed Tata that it would not give any guarantee for gas supply for 20 years.

Tata came up with a new offer of $3.10 per unit of gas price for its fertiliser plant in April 2006. The revised deal also included a proposal to pay $2.60 per unit gas price for the steel plant.

The Tata offer faced political resistance from the outset as energy and environment lobbies, with encouragement by former officials of state-run PetroBangla, opposed it.

In mid-2006, then government of prime Minister Khaleda Zia postponed a decision, conveying to Tata that their proposal was “politically sensitive” and that the next elected government should decide.

The elections were called off in January 2007 and the present army-backed caretaker government of Chief Adviser Fakhruddin Ahmed, preparing for elections in December, had also not moved to decide on the Tata proposals.

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