Tata drops $3b investment plan, finally
FE Report | Friday, 1 August 2008
Indian business conglomerate Tata Group has finally dropped its proposals on US$ 3.0 billion investment in Bangladesh as there is no commitment from the government for gas supply to its steel, power and infrastructure projects.
"It is clear that the Bangladesh government will not be in a position, in the foreseeable future, to grant the projects the natural gas commitment they would require. Consequently, there is no prospect of taking these projects further," said the Tata Group in a statement Thursday.
"A letter to this effect was handed over today (Thursday) to the Executive Chairman, Board of Investment, government of Bangladesh," the Group said.
The Tata, however, said it has other interests in Bangladesh, which it will continue to develop.
In the statement, the Indian industrial giant said that it first proposed four large projects in Bangladesh in 2004, and had intensive discussions with the government until 2006. At that point the group suspended future work on the projects, as agreement on key issues with the government was not possible, it said.
Since then the Group has had frequent enquiries on the status of the projects and the prospects for reviving negotiations with the government, the Tata Group said.
With interests ranging from computer software to hotel, the Indian business giant planned to set up a steel plant with an annual capacity of 2.4 million tonnes, two power plants and a fertiliser unit.
Energy secretary Mohammad Mohsin termed the Tata's move not very encouraging for the country's future investment prospect. He, however, said the government is struggling to provide gas to local and committed gas-run projects due to acute gas crisis.
Tata's requirement for gas was more than 200mmcfd (million cubic feet per day) that was not possible to meet right now, the energy secretary added.
When contacted, BoI chairman Kamal Uddin Ahmed said that Tata Group had informed the BoI that it would not further pursue its investment proposals.
"We're not frustrated by the Tata move because we've enough energy resources. We'll be able to attract more foreign investments after the finalisation of coal policy," the BoI chief said.
Another BoI official said that the government could not give any assurance to the Tata about gas supply because the country has a shortage of gas.
"It's true that there is scarcity of gas, but we're exploring new gas fields," the official said.
When contacted, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Anisul Haque said the Tata's move to drop its investment plan would not give a positive signal for foreign investment.
"There should have a decision on the Tata's proposed investments whether it is acceptable or not. It was not wise to keep the investment proposals pending for a long time," the FBCCI president said.
According to the BoI, the Tata Group moved its investment proposal first in 2004 and signed an expression of interest (EoI) with the BoI in presence of the Group Chairman Ratan Tata.
After signing the EoI, Tata submitted investment plan to the government in April 2005, in which it proposed to set up a 2.4 million tonne steel plant, a one million tonne urea plant and a 1,000 MW thermal power plant.
The then four-party alliance government had promised to give a decision on the Tata projects by June 2006.
But after two years of negotiations, the government halted the process, saying political sensitivities just ahead of the polls made it difficult to reach a decision and left it for the new government after parliamentary elections.
On May 10, 2008, senior Tata executives, led by its executive director Alan Roseling, held a meeting with top government officials to discuss the Tata's $3.0 billion investment proposals.
During the meeting the government informed the Tata executives that there was not enough gas to feed their projects. The Tata executives told the meeting that it would consider making investments in its coalmining and coal-based power plants once the country's coal policy is finalised.
"It is clear that the Bangladesh government will not be in a position, in the foreseeable future, to grant the projects the natural gas commitment they would require. Consequently, there is no prospect of taking these projects further," said the Tata Group in a statement Thursday.
"A letter to this effect was handed over today (Thursday) to the Executive Chairman, Board of Investment, government of Bangladesh," the Group said.
The Tata, however, said it has other interests in Bangladesh, which it will continue to develop.
In the statement, the Indian industrial giant said that it first proposed four large projects in Bangladesh in 2004, and had intensive discussions with the government until 2006. At that point the group suspended future work on the projects, as agreement on key issues with the government was not possible, it said.
Since then the Group has had frequent enquiries on the status of the projects and the prospects for reviving negotiations with the government, the Tata Group said.
With interests ranging from computer software to hotel, the Indian business giant planned to set up a steel plant with an annual capacity of 2.4 million tonnes, two power plants and a fertiliser unit.
Energy secretary Mohammad Mohsin termed the Tata's move not very encouraging for the country's future investment prospect. He, however, said the government is struggling to provide gas to local and committed gas-run projects due to acute gas crisis.
Tata's requirement for gas was more than 200mmcfd (million cubic feet per day) that was not possible to meet right now, the energy secretary added.
When contacted, BoI chairman Kamal Uddin Ahmed said that Tata Group had informed the BoI that it would not further pursue its investment proposals.
"We're not frustrated by the Tata move because we've enough energy resources. We'll be able to attract more foreign investments after the finalisation of coal policy," the BoI chief said.
Another BoI official said that the government could not give any assurance to the Tata about gas supply because the country has a shortage of gas.
"It's true that there is scarcity of gas, but we're exploring new gas fields," the official said.
When contacted, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Anisul Haque said the Tata's move to drop its investment plan would not give a positive signal for foreign investment.
"There should have a decision on the Tata's proposed investments whether it is acceptable or not. It was not wise to keep the investment proposals pending for a long time," the FBCCI president said.
According to the BoI, the Tata Group moved its investment proposal first in 2004 and signed an expression of interest (EoI) with the BoI in presence of the Group Chairman Ratan Tata.
After signing the EoI, Tata submitted investment plan to the government in April 2005, in which it proposed to set up a 2.4 million tonne steel plant, a one million tonne urea plant and a 1,000 MW thermal power plant.
The then four-party alliance government had promised to give a decision on the Tata projects by June 2006.
But after two years of negotiations, the government halted the process, saying political sensitivities just ahead of the polls made it difficult to reach a decision and left it for the new government after parliamentary elections.
On May 10, 2008, senior Tata executives, led by its executive director Alan Roseling, held a meeting with top government officials to discuss the Tata's $3.0 billion investment proposals.
During the meeting the government informed the Tata executives that there was not enough gas to feed their projects. The Tata executives told the meeting that it would consider making investments in its coalmining and coal-based power plants once the country's coal policy is finalised.