Tata's departure: A wakeup call
Sunday, 3 August 2008
The inevitable has happened, The Indian industrial conglomerate, the Tata Group, last Thursday announced the decision to abandon its US dollar 3.0 billion investment plan for Bangladesh, pointing out the government's inability to provide gas to its proposed projects in the 'foreseeable' future. The Tata Group deserves appreciation for displaying the utmost patience and keenness to invest in Bangladesh in the face of the government's usual foot-dragging on the issue for the past four years. The Group, which has spent a good amount of money in maintaining a resident office to help get its investment plan through, has finally decided to call its investment plan off, possibly, in the backdrop of deteriorating gas situation in Bangladesh.
When the Tata signed an Expression of Interest (EoI) with the Board of Investment (BoI) in October, 2004 on its US$ 2.0 billion investment proposal there was a sort of euphoria in the official circles. Over the next one and a half years, the Group twice revised upward the investment proposal to $3.0 billion while opposition to the government's move to supply gas to its (Tata's) proposed fertilizer, steel and power plants was gaining strength domestically. But it is not the opposition from a section of businesses, political parties and experts that has deterred the government from taking a positive decision on the Tata's investment proposal. Rather, the prevailing dismal gas supply situation has forced the government to delay a decision on the issue. It remains a puzzle as to why the government has kept the Tata waiting for such a long time when the domestic industries and power plants have been suffering due to short supply of gas.
As the developments suggest, neither the Tata nor the government had done the necessary homework on the gas issue while submitting and receiving the investment proposal. When Tata came here with the investment plan, all concerned had an impression that Bangladesh was floating on gas. The assessment by some external agencies, including the US Geological Survey, about the gas reserve led to the build-up of such an impression. However, it is still hard to say anything definitive about the country's gas reserve until and unless extensive exploration works in offshore and onshore areas are completed. But exploration works involve a lot of time and money. The government, after a long wait, has only recently initiated the third-round international bidding for offshore blocks in the Bay of Bengal and the response from the international oil companies has not been that encouraging. So, finding new gas reserves may take a lot of time. In the meanwhile, worries about the country's energy security is mounting in the backdrop of the experts' estimate that the proven gas reserve would be enough to meet the domestic demand for another four to six years. So, the decision of the Tata Group to abandon its investment plan is a right one since everything about the availability of gas remains uncertain here. It would have been rather unrealistic for Tata to expect gas for its planned projects when hundreds of domestic industries and public sector power plants have been complaining about non-supply or inadequate supply of gas.
There is no denying that the withdrawal by the Tata is an obvious outcome under the prevailing circumstances. But it rather appears strange that some government leaders are putting on a brave face, claiming that the withdrawal would not leave any impact on the foreign investment flow into the country. The Tata's withdrawal would surely send a negative signal to other prospective foreign investors. However, the situation can only be reversed if the government takes up immediate steps for ensuring energy security for the country. But that would require prompt decision on the extraction and use of coal and extensive exploration activities for gas and oil in both onshore and offshore areas. And the government in carrying out that task should not waste time paying heed to the jingoistic utterances of the so-called politicians and experts.
When the Tata signed an Expression of Interest (EoI) with the Board of Investment (BoI) in October, 2004 on its US$ 2.0 billion investment proposal there was a sort of euphoria in the official circles. Over the next one and a half years, the Group twice revised upward the investment proposal to $3.0 billion while opposition to the government's move to supply gas to its (Tata's) proposed fertilizer, steel and power plants was gaining strength domestically. But it is not the opposition from a section of businesses, political parties and experts that has deterred the government from taking a positive decision on the Tata's investment proposal. Rather, the prevailing dismal gas supply situation has forced the government to delay a decision on the issue. It remains a puzzle as to why the government has kept the Tata waiting for such a long time when the domestic industries and power plants have been suffering due to short supply of gas.
As the developments suggest, neither the Tata nor the government had done the necessary homework on the gas issue while submitting and receiving the investment proposal. When Tata came here with the investment plan, all concerned had an impression that Bangladesh was floating on gas. The assessment by some external agencies, including the US Geological Survey, about the gas reserve led to the build-up of such an impression. However, it is still hard to say anything definitive about the country's gas reserve until and unless extensive exploration works in offshore and onshore areas are completed. But exploration works involve a lot of time and money. The government, after a long wait, has only recently initiated the third-round international bidding for offshore blocks in the Bay of Bengal and the response from the international oil companies has not been that encouraging. So, finding new gas reserves may take a lot of time. In the meanwhile, worries about the country's energy security is mounting in the backdrop of the experts' estimate that the proven gas reserve would be enough to meet the domestic demand for another four to six years. So, the decision of the Tata Group to abandon its investment plan is a right one since everything about the availability of gas remains uncertain here. It would have been rather unrealistic for Tata to expect gas for its planned projects when hundreds of domestic industries and public sector power plants have been complaining about non-supply or inadequate supply of gas.
There is no denying that the withdrawal by the Tata is an obvious outcome under the prevailing circumstances. But it rather appears strange that some government leaders are putting on a brave face, claiming that the withdrawal would not leave any impact on the foreign investment flow into the country. The Tata's withdrawal would surely send a negative signal to other prospective foreign investors. However, the situation can only be reversed if the government takes up immediate steps for ensuring energy security for the country. But that would require prompt decision on the extraction and use of coal and extensive exploration activities for gas and oil in both onshore and offshore areas. And the government in carrying out that task should not waste time paying heed to the jingoistic utterances of the so-called politicians and experts.