News: Tata offers to raise Bangladesh investment

(RTR 30/04/2006) Mumbai - The Tata group offered on Sunday to increase a proposed investment in Bangladesh to $3 billion and to set aside a 10 percent stake in its Bangladeshi business for the government, a senior official in Dhaka said.

Tata also has offered to buy natural gas in Bangladesh at $3.10 per thousand cubic feet, more than double the previous offer, and to list its Bangladeshi business on the country's stock exchanges, Mahmudur Rahman, executive chairman of Bangladesh's Board of Investment, told reporters.

"They have offered a joint venture in which Bangladesh will own 10 percent of Tata projects in the country," said Mahmudur, who is also the government's energy adviser. "They have also expressed wishes to raise funds from the (Bangladesh) capital markets.

"We consider the proposals as the most positive developments," he added.

One of Bangladesh's top economists, Professor Wahiduddin Mahmud, said the latest offers demonstrated goodwill by both Tata and the Bangladesh government.

"It will have a long-term impact on Bangladesh's foreign direct investment," he told Reuters.

Tata's proposed projects in power, steel, fertiliser and coal would constitute the largest single foreign investment ever made in Bangladesh, equal to the total the country has received since 1972, BOI officials said.

"If the investment plan is executed, Bangladesh's GDP (gross domestic product) will increase by 1.9 percent annually and the balance of payments will have a positive impact to the tune of $18 billion," Alan Rosling, executive director of Tata Sons, said at a news conference.

"The projects will create employment opportunity for 24,000 people," he added.

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Tata wants to set up a steel plant with annual production capacity of 2.4 million tonnes, a urea factory with 1 million tonnes capacity, a 500 megawatt coal-fired power station and a 1,000 mw gas-fired power plant.

Rosling said Petro-Bangla (the government's energy exploration arm) had agreed to a joint venture in coal mining for the 6 million-tonne Barapukuria project.

Tata will require 200 million cubic feet of gas per day (mmcfd), officials said. The country has 14 trillion cubic feet of proven and recoverable gas reserves, according to energy ministry estimates.

In October 2004 Tata proposed to invest $2 billion in Bangladesh, but it made no headway over a dispute on the price of gas. Later the investment offer was raised to $2.5 billion, Mahmudur said, before reaching $3 billion on Sunday.

"They offered to pay $3.10 for per thousand cubic feet of gas (mcf), instead of $1.50 offered earlier," Mahmudur said. Bangladesh energy officials said the domestic price for natural gas is currently more than $2 for per thousand cubic feet.

Mahmudur said Tata's price went up while the required guarantee period came down to 10 years.

"They have requested us to say yes or no by end of May and want to sign a final agreement by July," Mahmudur said. "Negotiations are over, and now it is time to take decision."

Tata also plans to set up two hospitals and two training centres for employees in Bangladesh as a part of its welfare programme, he added.

Tata has asked Bangladesh to give it a 10-year tax holiday for its steel and coal projects and strong infrastructural support, Mahmudur said.

The company says the current five-year tax holiday for foreign investors is too short for such large-scale projects.

Rosling said, "If you want to industrialise your country, you have to take decisions without the lapse of valuable time."

The Tata Group includes 80 business entities in services, materials, engineering, energy, consumer products, chemicals, and telecommunications.

It also runs India's largest hotel chain and is the country's biggest software services exporter and truckmaker.