Week 22-29th Feb,2016
State-run Indian firm Bharat Heavy Electricals Ltd (BHEL) is poised to seal a contract to build a $1.6 billion power plant in Bangladesh, beating out a Chinese competitor in the latest commercial tussle between the region’s two dominant powers.
• After China’s recent success in pushing development projects in Sri Lanka, a breakthrough in Bangladesh would be welcome news for Indian officials who have long fretted over Beijing’s encroachment on to territory it considers its own back yard.
• India believes Bangladesh is a part of a “String of Pearls” China is building across the Indian Ocean that stretches from Gwadar port in Pakistan to Djibouti on the African coast where it is building a naval base.
• After years of negotiations, BHEL will sign a contract to build a 1,320-megawatt (MW) thermal power station in Khulna in southern Bangladesh on February 28, officials in New Delhi and Dhaka said.
• China’s Harbin Electric International Company Ltd, which has power projects in Iran, Turkey and Indonesia among others, lost the bid on technical grounds, said a Bangladesh official, speaking on condition of anonymity since he was not authorised to talk to journalists.
• The Indian government’s external lending arm, the Exim Bank, has backed up BHEL’s offer with nearly 70 percent funding of the project’s costs at a soft interest rate of around 1 percent above Libor, the leading global benchmark for pricing transactions, an Indian government official said.
• It would be the biggest foreign project by an Indian power firm, eclipsing a plant already built in Rwanda and a planned one in Sri Lanka.
• India and China have stepped up bids for infrastructure projects in the region in recent years, with Prime Minister Narendra Modi pushing for a greater engagement with smaller neighbours after years of neglect.
• The loss of the power project is the second setback for China, after Japan muscled into Bangladesh’s port sector last year, offering 80 percent financing on easy terms for a seaport, barely 25 km from a $8 billion deep water port that Beijing was negotiating to construct.
• The proposed power plant will have two units of 660 MW that will generate power for local consumption. Nearly two-fifths of Bangladesh’s 160 million people do not have access to electricity, according to the World Bank.
• The project, though, has raised environmental concerns, with activists warning that the movement of coal posed a threat to the nearby Sundarbans, the world’s largest mangrove forests. They said the government had acquired the land and pressed on with the power station even before the environmental assessment was completed.