Tatas' Bangladesh plan hits fresh road block

Barely 10 days after submitting a revised proposal for its $3-billion investment to the Bangladesh government, the Tata group is facing yet another road block "" this time from local steel manufacturers.

The neighbouring country's two prominent steel industry associations "" Bangladesh Steel Mills Owners' Association and Bangladesh Re-rolling Mills Association "" have threatened to launch a country-wide agitation from May 31 if "the Indian heavyweight is ensured long-term guaranteed gas supply".

The two associations claim to represent 100 steel and 300 re-rolling mills across Bangladesh.

"If the Tata group is given guaranteed supply of gas for a long period, it will be disastrous for all local companies in terms of energy security as the country's gas reserve will deplete by 2011," Ali Hossain, president, Steel Mills Owners' Association, was quoted as saying by a Bangladeshi daily on Saturday.

According to him, the price of gas (to be supplied for the project) should be set on the basis of the international market price. The two associations organised a press meet in Dhaka last weekend to air their "concerns".

Apart from the gas price issue, local steel players fear that the Tata steel plant will produce cold-rolled steel, which will affect their market share. But the Tata group had earlier made its position clear that it would produce only hot-rolled steel, raw material for local industries.

Alan Rosling, executive director, Tata Sons, was unavailable for comments. A company spokesperson told Business Standard that the apprehensions of the local steel makers were unfounded. "They have a wrong impression. Right now, the Bangladesh steel industry is importing coils, and the proposed plant, when it comes up, will make it cheaper for the local steel players," the spokesperson said.

"We are not going to produce downstream products. The plant will only create value for the local players who are spending huge amounts of money importing them," the spokesperson added.

The gas price had been a bone of contention between the Indian major and the Bangladesh government. But this was sorted out in the revised plan (sent on April 30) in which the Tatas offered to buy natural gas at $3.10 per thousand cubic feet, doubling the previous offer of $1.5.

The Bangladesh steel players also want to be a party to the on-going negotiations. Hossain demanded that the government must consult them before signing any deal with the Indian conglomerate. "Otherwise, we will have no alternative but to go in for an agitation to save our businesses," he was quoted as saying by the local daily.

The steel sector leaders claimed that local millers had so far invested 5,000 crore takas (about Rs 3,300 crore) in about 100 steel units and more than 300 re-rolling mills in the country. More than a million people are said to have been employed in these mills.

The proposed $3 billion investment by the Tatas, the largest ever in Bangladesh, includes a 2.4-million-tonne-per-annum steel plant, a urea factory with a one-million-tonne capacity and a 1,000-Mw gas-fired power plant.