Friday, October 15, 2004

Bangladesh: TATA - "Agreement" Sans Deal ?

["Given the global trend of rising gas and oil prices, I think gas supply will be crucial issue in the deal. We will have to take care of national interests before signing gas guarantee deal with Tata," Finance and Planning Minister M Saifur Rahman told the function. "We need to know how much gas is in store in Bibiyana Gas Field and how long it will take to extract gas from the field before sealing an agreement with them (Tata). "If we do not take these into account, we cannot ensure uninterrupted gas supply to the proposed Tata plants and the projects will fall sick," Saifur told reporters.He pointed out that intra-regional trade in South Asia is only 2.5 percent compared with European Union's 60 percent and Asean's 35 percent and said the Tata investments may open a new avenue for increasing intra-regional trade. "But tariff, non-tariff and para-tariff barriers imposed by India must be removed to boost Indo-Bangla trade," he said. ]

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Bangladesh: TATA Agreement Sans Deal ?


Bangladesh hints at cautious approach

Bangladesh Finance Minister Saifur Rahman has hinted at a "cautious approach" before entering into a final deal with the Tata Group's plans to invest two billion dollars in that country.

"A tough negotiation may be needed particularly on the question of supply of requisite gas and its pricing for the proposed projects in the power, fertilizer and steel sectors," Rahman said after his meeting with Tata Group Chairman Ratan Tata on Wednesday.

"Our current macroeconomic situation and investment climate have created confidence and encouraged them to come to Dhaka with big investment, and we welcome them," Rahman said.

Replying to a question, the Bangladesh Minister said since natural gas would be the main raw material for the Tata projects, Bangladesh needs to look into the reserves.

"We will have to look into how much we have in our reserve and how much we could supply smoothly for 15 to 20 years after meeting our domestic demand," he said.

Asked about the pricing of gas, Saifur said the government would have to fix it commensurate with volatility of fuel prices on the international market.

Tata Group Chairman Ratan told reporters that they had not yet faced any problem regarding his proposal, and he would be able to explain their position after meeting with the concerned Bangladeshi Ministers.

Managing Director of Tata Steel B Muthuraman said they want to set up a basic industry to produce HR coil needed for manufacturing CR Coil for local steel mills for domestic consumption.

He said he plans to visit Chittagong in December and consult the Bangladeshi manufacturers there.

On gas supply needed, Muthuraman said, "smooth gas supply for a period of 20 years will be needed."

Sify 14/10/2004

2. Tata gets go-ahead to its investment plans

Govt to assess the package with donors' help; gas pricing, supply crucial issues

India's Tata Group yesterday signed an expression of interest with Board of Investment (BoI), getting a formal go-ahead to its proposed $2 billion investment package -- the biggest single investment in Bangladesh -- in power, steel and fertiliser sectors.

The government will, however, evaluate with donors' help the pricing and supply of gas for the power, steel and fertiliser plants to be set up in the western region.

The agreement does not spell out proposals in detail, BoI sources said, adding Tata may set up a $700 million basic steel industry in Ishwardi to produce 2.4 million tonne hot rolled coil and other basic steel products.

Under the planned deal, the Indian industrial giant may also pump another $700 million in the two 500-megawatt gas-fired power plants likely to be set up near Ishwardi. Its proposals also include investment for a $600 million fertiliser plant in Chittagong, capable of producing 1 million tonne a year.

Managing Director (MD) of Tata Power Ltd Firdose A Vandrevala, MD of Tata Chemicals Prasad Menon, MD of Tata Steel B Muthuraman and BoI Member Md Nazrul Islam signed the agreement at a ceremony at China-Bangladesh Friendship Conference Centre last night.

"Given the global trend of rising gas and oil prices, I think gas supply will be crucial issue in the deal. We will have to take care of national interests before signing gas guarantee deal with Tata," Finance and Planning Minister M Saifur Rahman told the function.

"But we must have to give guarantee, otherwise foreign investors will not show interest to come to Bangladesh," he said, adding if Tata invests in a big way here other investors will follow suit.

Saifur said the government will provide Tata with all support to establish its plants in Bangladesh, which will give new dimension to Indo-Bangla trade relations.

"As the investment proposals are now at the preliminary stage, we have to discuss where raw materials will come from, who will be employed and where the products will finally go," the finance minister said.

Foreign Minister M Morshed Khan, who attended the function, said Tata investments should not be limited to particular sectors. It may also investment in hospitality, aviation and service sectors.

He pointed out that intra-regional trade in South Asia is only 2.5 percent compared with European Union's 60 percent and Asean's 35 percent and said the Tata investments may open a new avenue for increasing intra-regional trade.

"But tariff, non-tariff and para-tariff barriers imposed by India must be removed to boost Indo-Bangla trade," he said.

Tata Chairman Ratan Tata said Bangladesh is a bustling country with great potential. "We want to make genuine investment which can generate employment here. We are committed to making it a reality as early as possible," he said.

"We want to be associated with Bangladesh's prosperity through the investment," he said.

He told reporters after a meeting with Saifur earlier on the day that they have not so far faced problems with their proposal. He added that he would be able to explain their position after meetings with the ministers today.

Indian High Commissioner to Bangladesh Veena Sikri said trade can be a strong driver of Indo-Bangla relationships. India has investments in nine fully-owned and 29 joint venture enterprises in Bangladesh, which will increase further as Bangladesh market is growing.

About trade imbalance, she said the proposed free trade agreement may help reduce the trade gap.

BoI Executive Chairman Mahmudur Rahman said implementation process of Tata projects may start in six months. He said Tata may sign a memorandum of understanding in December when details of the proposals will be finalised.

Talking to The Daily Star, MD of Tata Steel B Muthuraman said the proposed investment would create 8,000 employment directly and 60,000 jobs indirectly.

TOUGH NEGOTIATION

"A tough negotiation may be needed, in particular, on the issue of supply of requisite gas and its pricing," Saifur told reporters earlier on the day after meeting Ratan Tata at his planning ministry office.

He hinted at a cautious approach before sealing a deal with the Indian conglomerate.

"We need to know how much gas is in store in Bibiyana Gas Field and how long it will take to extract gas from the field before sealing an agreement with them (Tata).

"If we do not take these into account, we cannot ensure uninterrupted gas supply to the proposed Tata plants and the projects will fall sick," Saifur told reporters.

TECHNICAL SUPPORT

"Technical know-how is needed to evaluate such investment proposals," Saifur told reporters.

The WB has already offered technical support for implementation of the Tata proposals and the government will evaluate these with the help of WB experts, the finance minister added.

Donor agencies including the World Bank (WB) and Asian Development Bank (ADB), meanwhile, committed providing necessary support to the Indian conglomerate's investment proposal.

The commitment came during a meeting of the Tata Group chairman with the representatives of international donor agencies.

Earlier, the WB committed $2 million for a study on the investment proposals and preparing terms and conditions by a technical committee of Petrobangla, which oversees the gas sector.

The Group will set up gas-based power plants in the western region and if there is surplus power after meeting local demand, it will export that to India, the finance minister said.

"But everything depends on (availability) of gas supply and the pricing," Saifur told the media earlier on the day.

The finance minister added: "On our part, we need to look at how quickly we can develop the gas fields and extract gas from these fields... We also need to assess the domestic gas consumption and how much gas they will need before sealing the agreement."

On the gas pricing, Saifur said, the government will have to supply gas to the proposed Tata plants for 15 to 20 years and for that, it will have to start a tough negotiation about what the gas pricing would be during that period.

The gas pricing would have to be commensurate with the volatile international fuel prices, he added.

"These elements (supply and price) will have to be there in the agreement to protect interests of both sides," the finance minister said.

On the economic viability of the planned plants, Saifur quoted Tata Group officials as saying, "You (Bangladesh) have gas and there is no point keeping them underground. The gas needs to be properly utilised."

Asked if the Indian conglomerate is interested only in gas-based industries, he said, "Is it not natural, what else does Bangladesh have other than gas?"

On whether the fertiliser plant Tata plans to set up will be a repeat of the Kafco (Karnaphuli Fertiliser Company) fiasco, the minister admitted that they have had a bitter experience with Kafco and that this time they will conduct a feasibility study on the planned Tata projects in a professional, efficient manner.

He ruled out the possibility of supplying gas to the Tata plants at Kafco rates.

WB, ADB READY TO ASSIST

The donor agencies took the biggest investment proposal in Bangladesh from India positively and committed to providing support in making the proposal a reality, meeting sources said.

International Finance Corporation, the private-sector arm of the WB, co-ordinated the meeting at Pan Pacific Sonargaon Hotel yesterday.

"Bangladesh has natural gas and Tata has money and technical expertise, so both could be benefited on the basis of a mutual understanding," said David Hughart, operations advisor of the WB, after the meeting.

He, however, said more discussions are still required.

"We are very much encouraged by the proposal and ready to facilitate it through infrastructure development," said Hua Du, deputy country representative of the ADB.

She said if necessary, the ADB would also provide supplementary support for the investment project.

Asked whether Tata has had any specific proposal for logistics or other support for implementation of its projects, she said the proposal was made to the government and donor agencies would discus about it with the government later on.

Hua said the ADB has been providing support for long for development of the private sector in Bangladesh. "So it would also continue in future."

Finance Minister M Saifur Rahman listens to Tata Group Chairman Ratan N Tata before signing an expression of interest on the Indian business giant's $2b investment proposal at Bangladesh-China Friendship Conference Centre last night. PHOTO: STAR

Daily Star 14/10/2004