The Tata Group may have to change fuel plan for its $3 billion projects in Bangladesh after the local government asked it to wait for its soon-to-be-announced coal policy.
The Bangladesh government said it could not spare gas for the plants of the Indian conglomerate. The announcement of the coal policy is expected soon, a government representative said.
The coal policy may help Tatas for setting up coal-based power plants in Bangladesh. As there is no guarantee for natural gas supply, the group is not likely to go ahead with its steel and fertiliser plants, said sources.
"Without the guarantee of natural gas, we can not move forward as the projects are purely gas-based," Tata Sons Executive Director Alan Rosling told Business Standard.
The projects have not moved in the last couple of years and nothing has come out of the group's recent meeting with the Bangladesh government, said Rosling.
During its latest discussion, the government informed Tata officials about the the country's depleting energy resources and said it was not possible now to supply 200 million cubic feet of gas daily for 20 years for the proposed plants, reported Bangladesh media.
"Bangladesh with 13.54 trillion cubic feet of proven and recoverable gas reserves is facing at least 150 million cubic feet of gas (mmcf) shortage a day. It now supplies up to 1,738 mmcf of gas daily against a demand of 1,888 mmcf," Bangladesh media quoted government officials.
In 2003, Tatas made investment proposals worth $1.8 billion when Ratan Tata visited the country. Later, the group hiked the investments proposal to $3 billion with more projects envisaged as part of a larger effort to use Bangladesh's resources to speed up industrial development there.
In October 2004, the group signed an initial deal with Bangladesh to build a steel plant with an annual production capacity of 2.4 million tonne, a urea plant with a 1 million tonne capacity, a 500 mw coal-fired power station and a 1,000 mw gas-fired power plant.
Tatas had also offered to set aside 10 per cent stake in its local business for the Bangladesh government and list them on the Dhaka Stock Exchange, said sources.
In April 2006, Tata group suspended investment plans because of 'frustrating' delays in getting approvals from local authorities. The political scene in Bangladesh also changed.
The army-backed interim government headed by former Central Bank Chief Fakhruddin Ahmed came to power in January 2007.
But the government has often said the Tata deal was a major decision an elected government would be better placed to handle. After the recently failed talks, the government has not yet said anything about the next round of talks.