Tata's $2.5 bn B'desh projects stalled
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Tata's $2.5 bn B'desh projects stalled

Plans by Tata Group to invest $2.5 bn in Bangladesh were stalled after negotiations with Dhaka over the price of natural gas faltered.

india Updated: Feb 10, 2006 11:31 IST

Plans by Indian industrial giant Tata Group to invest $2.5 billion in Bangladesh were stalled after negotiations with Dhaka over the price of natural gas faltered, the two sides said on Thursday.

"We could not reach agreement mainly on gas pricing and there will be no further negotiations on this (for now)," the government's energy adviser Mahmudur Rahman said.

But he added that Tata officials might return in two weeks with revised proposals.

Tata's proposed projects in the power, steel and fertiliser sectors would be the biggest-single investment in Bangladesh, and the Asian Development Bank (ADB) said it help spur economic growth, improve the balance of payments and create jobs in less-developed areas, says an ADB report.

When Tata Chairman Ratan N Tata signed the deal in 2004 he said that Bangladesh's energy minister had assured a smooth flow of natural gas to run the plants for 20 to 25 years. Tata projected that the ventures would start operations by end-2008.

Tata Group has offered to pay $1.50 per thousand cubic feet of gas (mcf), which Bangadeshi officials considered not high enough if the group wanted a guarantee for uninterrupted supply of gas over 20 years. Tata would require 200 million cubic feet of gas per day (mcfd), officials added.

"If they seek a guarantee, the price will have to be higher," Mahmudur said, adding Bangladesh has demanded more than $2.00 per mcf of gas.

S Manzer Hussain, Tata's resident director in Bangladesh, told Reuters: "We discussed thoroughly, but still there are some gaps.

"Now we will place a comprehensive report to the Bangladesh government on the basis of just-concluded negotiations within the next couple of weeks."

Bangladeshi officials had also said Dhaka had agreed to guarantee a 20-year supply of natural gas for the Tata projects: a 1,000-megawatt power plant, a 1 million tonne-per-year fertiliser plant and a 2.4 million-tonne steel mill.

The country has 15.33 trillion cubic feet of proven and recoverable gas reserves, energy ministry estimates showed.

First Published: Feb 09, 2006 14:23 IST