Public sector energy giant, Bharat Heavy Electricals Limited (BHEL) is soon to sign a $1.6 billion contract to set up a 1320 MW thermal power plant in the southern Khulna district. BHEL has bagged the deal for which China’s Harbin Electric International Company was also in the race. When completed it will be the largest foreign venture by an Indian power company.
A joint venture, Bangladesh-India Friendship Power Company, has been setup to build the coal fired plant. Anwarul Azim, a spokesman of the company said BHEL was the lowest bidder. India’s Exim Bank, is providing 70 percent of the funding at the low interest rate of about 1 percent above the Libor – the London benchmark for global interest rates.
For the Chinese, the Khulna loss is the second setback after losing the bid for Sonadia deep-sea port near Chittagong, the country’s major port.
China had carried out extensive feasibility assessments and agreed to provide 99 percent of funds to build Sonadia. When Bangladesh Prime Minister Sheikh Hasina visited Beijing in June 2014 it appeared that the deal had almost been clinched. But when no agreement was signed, Chinese state media reported that “both sides expressed willingness to have further negotiations.”
By last July, it became clear that Bangladesh was moving to shelve the Sonadia port after Japan got the go ahead to build deep-water port in Matarbari, just 25 kilometres from Sonadia. Bangladesh planning minister, A.H.M. Mustafa Kamal, told Reuters that Matarbari would be a “comprehensive” project, adding that “Matarbari is sufficient, we may have to give up the other port project”.
Media reports also said “some countries, including India and the United States, are against the Chinese involvement with Sonadia port, which could have ended up as a part of string of pearls Beijing has created in the India Ocean. Lanka Port at Hambantota, and Pakistan’s Gwadar are a part of these pearls designed to safeguard China’s s maritime interests – dependence on sea lanes for energy imports.
The Sonadia port would have increased China’s presence in Bay of Bengal. And placed Andaman and Nicobar Islands under Chinese watch. This low-lying and mostly uninhabited archipelago of 572 islands is strategically important for India. It hosts the Tri-service Command created in 2001 to safeguard India’s interests in the region.
Hasina government has also decided to build a port in Payra, to the west of Chittagong and much closer to the Indian coastline. While the project was first announced in 2013, the bill to establish the port was passed by the Bangladesh parliament on March 2. Dhaka is considering an Indian proposal to build the $15.5 billion project, Bangladesh News Today reported.
After the Modi government came to power in New Delhi, India-Bangladesh relations have moved to high gear. Modi visited Dhaka last June and signed agreements that ended a four-decade border dispute. He also promised a $2 billion line of credit and the release of a previously agreed $800 million. A total of 22 agreements were signed, including on maritime security and the establishment of special economic zones in Bangladesh.
Indian businessmen attending the Bangladesh Investment and Policy Summit in Dhaka in January promised to invest over $11 billion in various infrastructure projects, including a gas pipeline from Orissa to Bangladesh and an LNG power plant.
New Delhi is currently building a transit route to the northeast India through Bangladesh using rail, road and waterways. It has already entered into a new deal that will result in more power to Bangladesh and badly needed telecom spectrum for the North-eastern India.
India’s interest in Bangladesh is part of its “Act East policy”. Transit routes through Bangladesh would provide a direct land route from India to Burma and South East Asia.
This is not to say that China has not created substantial interests in Bangladesh. It is involved in upgrading Chittagong port. And bagged the $705 million contract for a two-lane tunnel under the Karnaphuli River. China is Bangladesh’s largest trading partner.