Tata Group abandons $3Bn investment plan in Bangladesh

Thursday, 31 July 2008, 07:00 Hrs
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New Delhi: Indian conglomerate Tata Group has announced that it had scrapped its U.S.$3 billion investment plan in Bangladesh as it saw no prospect of taking further the projects, which were viewed as politically sensitive and on which successive Bangladesh governments have remained undecided.

"It is clear that the government will not be in a position, in the foreseeable future, to grant the projects the natural gas commitment they would require," the Tata Group said in a statement on its website.

"Consequently there is no prospect of taking these projects further," it added.

The reaction of the Bangladesh government was not known.

The Tata offer, the biggest ever received by Bangladesh when the group chief Ratan Tata visited Dhaka in 2004, had faced political resistance right from the beginning.

The $38.3 billion Indian conglomerate abandoned the plan after four years of its endeavour to pursue the Bangladesh government for ensuring a guaranteed supply of gas, the web site of The Daily Star said late Thursday evening.

The Tata proposals were widely perceived as India's response to Bangladesh's resistance to selling gas to India. India hoped to utilize the gas within Bangladesh, thereby developing the latter's industrial infrastructure.

However, resistance built up on the question of Tata seeking "concessional" rates for the gas it would purchase for the projects. There was lobbying against any "concessions" to Tata by semi-government bodies and NGOs.

In the summer of 2006, the then government of Prime Minister Khaleda Zia decided to postpone a decision, saying the proposals were "politically sensitive" and that they should be taken up by the next elected government.

That the Zia government, with a two-third majority, was politically strong enough to decide, but did not, when the MNCs, including Unocal, engaged in gas explorations and were keen that Bangladesh export it, was criticized by international donors including the Asian Development Bank (ADB).

The Tata group, however, had kept up ties, making inquiries with the present government. Its country chief Manzar Hossain had said the group had been pleased with the support and courtesies extended by the government, particularly the Board of Investment, during the discussions.

"The Group has other interests in Bangladesh, which it will continue to develop," the statement said.

The global acquisition giant Tata Group, which made overseas acquisitions of $18 billion in the last eight years, proposed four large projects - steel, power and fertiliser in 2004 and continued intensive negotiations with the Bangladesh government until 2006.

The projects were suspended in 2006 ahead of general elections in the South Asian nation that were called off. The polls are now scheduled for December.

"At that point the group suspended further work on the projects, as agreement on key issues with the government was not possible," the statement said, adding, "Since then the Tata Group has had frequent enquiries on the status of the projects and the prospects for reviving negotiations with the government," the Tata statement said.

Md Kamaluddin Ahmed, executive chairman of the Board of Investment, told bdnews24.com by phone that it was not possible for Bangladesh to supply the huge amount of gas Tata would need for its project.

"Tata has informed us that it will not pursue the proposal for gas-based projects in Bangladesh," Ahmed said.

Most of the Tata proposals were based on coal, he said. "We need to make the coal policy before having talks on the issue."

Annisul Huq, president of the Federation of Bangladesh Chambers of Commerce and Industry, told bdnews24.com that Tata's withdrawal would taint the image of the country abroad.

He feared Tata's decision might affect investment in the country.

The FBCCI president said Tata's decision was pending for long because of political indecision.

"Foreign investment in the country is not good in the country. Tata's withdrawal might put a negative impact on investment," he added.
Source: IANS
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