India to ink $1.6 bn power deal with Bangladesh

This project is being seen as a ‘special’ one for India, owing to its importance as the largest foreign project to be banked by an Indian power company The Dollar Business Bureau

BHEL is being supported by its external lending arm, the Exim Bank, which is funding nearly 70% of the project’s costs at a soft interest rate of around 1% above Libor, the global benchmark for pricing transactions

  Years of discussion have finally borne fruit for BHEL, which will sign a $1.6 billion power contract with Bangladesh on February 28. According to the deal, a 1320 MW thermal power station is to be built by BHEL at Khulna. This news comes as a great relief to India as China had bagged many prestigious development projects in Sri Lanka, edging out India. For China, this could be the loss of one precious pearl in its ‘String of Pearls’ countries that China intends to build, showcasing its geopolitical influence, in the Indian Ocean through efforts to increase access to ports and airports, modernize military forces and establish strong trading ties with its partner countries. The string of pearls refers to the network of Chinese military and commercial facilities and relationships along its sea lines of communication which extend from the Chinese mainland to Djibouti in Port Sudan. China’s Harbin Electric International Company, which has executed some major projects in Indonesia, Turkey and Iran among others, lost the bid on technical grounds. However, an official spokesman of the Bangladesh-India Friendship Power Company Limited, a joint venture set up to build the coal-fired plant, had reportedly said that the only reason India bagged the deal was because ‘BHEL was the lowest bidder’. BHEL is being supported by its external lending arm, the Exim Bank, which is funding nearly 70% of the project’s costs at a soft interest rate of around 1% above Libor, the global benchmark for pricing transactions. This project is a ‘special’ one for India, as this is seen as the largest foreign project to be banked by an Indian power company. However, with regard to environmental concerns, India and Bangladesh do face the challenge that the coal project could have on the Sunderbans, the largest mangrove forests in the world.  How they go about protecting it remains to be seen.  

February 23, 2016 | 04:50pm IST