$3 billion Tata project in B'desh in crisis

The $ 3 billion Tata project in Bangladesh is in deep crisis. The government is dilly dallying to give the green signal to the project and the Tatas do not want to wait any longer. If things do not materialise in the next few months, they are moving out.

Tatas have proposed to invest in three areas: a 2.4 million ton Steel Plant, one million ton urea plant and 1000 MW gas fired power plant. While the company already has presence in the country in terms of trading operations of various products like tea, heavy vehicles, watches, it started looking for a greater presence in terms of locational advantages and better investment opportunities considering the demand for the three products in the country.

Talks started way back in 2004 and an Expression of Interest was signed in October 2004. From May 2005 onwards both the government and the Tatas got down to chalk out the basic details of the project. There were four rounds of negotiations and in April 2006 the final offer was given.

There were three contentious issues in which the government seems to have got stuck and not willing to take a decision readily. Firstly, the gas price. For the Tatas, gas is a raw material for the steel and the urea plants and they are only willing to pay a product linked gas price which will vary according to the marketability of the product. Secondly, Tatas wanted an uninterrupted gas supply guarantee and a security of gas supply for 14 years. Thirdly, the company wanted permission for an open cast coal mining for supply to the power plant which became a debatable issue over pollution involving large tracts of land.

The Tatas offered up to 10 per cent of equity participation of the government in each project and a promised of an IPO. In addition, as a part of their corporate social responsibility, there were pledges like training centers, hospitals and townships to surround the community.

But all these seem to have not received the desired impact in the government. No politician, it appears, is to take the decision to avoid controversy. While there are controversial issues of providing incentives to the Tatas, local steel manufacturers are suffering from the unknown fear of a giant gobbling up their business. They have now demanded to the government about uninterrupted power supply for themselves too on the lines of the Tata proposal. Politicians are wary about the issues of pollution and displacement of people for land acquisition. "No one wants to take a decision, every one wants the other to take it", said a top government officer.

Nazrul Islam, Chairman of the Board of Investment told HT : "I have sent the proposal to the government and its up to them to decide". But will not inordinate delay cast a shadow on the project ? He was asked. He admitted saying "I agree and an early decision is required".

For the Tatas, time is running out. "The waiting continues and we are concerned. Either we move ahead or close the chapter here and focus somewhere else. We can't go on spending money indefinitely" said S Manzer Hussain, Resident Diector of Tata group in Dhaka.