India's biggest business conglomerate, the Tata group has indefinitely suspended work on its $ 3 billion investment plan in Bangladesh because of frustrating delays by the Bangladeshi government in approving the proposal.

Tata's plan includes a steel plant with an annual production capacity of 2.4 million tonnes, a urea factory with a 1 million tonne capacity, a 500 mw coal-fired power station and a 1,000 mw gas-fired power plant.

The projects, if approved, would have amounted to the largest single foreign investment ever made in Bangladesh and would equal the total the country has received since 1972.

In February this year, talks between Tata and Dhaka had temporarily stalled over the price of natural gas to be used in the projects.

In April, however, Tata increased its offer to $ 3.10 per thousand cubic feet of gas, and offered to set up two hospitals and two training centres for employees. In return, it asked for a 10-year tax holiday for the steel and coal projects.

According to investment analysts, the Bangladesh Government, which was supposed to respond to Tata's proposal by end-June and sign a final agreement by July, may lose out on a huge deal as Tata also had offered to set aside a 10 percent stake in local business for the Bangladesh government and list the concerns on the Dhaka stock exchange.

On July 10, Tata's executive director Alan Rosling met Mahmudur Rahman, chairman of the Bangladesh government's Board of Investment and head of energy ministry, in Dhaka to discuss the latest situation.

However, the Bangladesh government's inability in approving the $ 3 billion proposal until a new government is formed in January next year, has forced Tata group to suspend further work on the projects.

We strongly believe that the investments proposed by us would be beneficial to both Bangladesh and the Tata group. We are disappointed that progress has not been made since we submitted our revised offer. We now understand that the government is only likely to take matters forward after the general elections scheduled for January 2007, Rosling said in press statement, following his meeting with Rahman and other government officials.

We are firm believers in the economic development of Bangladesh, and will continue to monitor opportunities in the country closely. However, if indeed we are facing such a delay from the government, we have no option but to suspend further work on these projects, Rosling said.

We thought the projects were good for the country's economy, for the people and the balance of payment. Now we are frustrated and disappointed as we have spent huge money, time and efforts (on the plans), he said.

If the government does not make a decision we can't wait. We have been waiting for ten weeks to the government response, he added, indicating that the group might look elsewhere to implement the projects.

Commenting on the future prospects of the projects, Rosling said, While we are keen to invest in these projects, their revival after a considerable delay must depend on circumstances at that point. We constantly examine opportunities worldwide and would need to assess the attractiveness of investment in Bangladesh compared to other options then available to us.

Rosling, however, confirmed that the proposal was suspended and not withdrawn.

While regretting Tata's decision of suspending the proposal, Rahman said that the government would take all steps to further examine and study the proposal so that the projects may go ahead.

Admitting that his government took a long time to decide, Rahman said that a high-level committee headed by the industries minister would study the proposal before it is placed before the cabinet.

Meanwhile, the ruling Bangladesh Nationalist Party (BNP) Secretary General, Abdul Mannan Bhuiyan, said that his government could go ahead with the proposal if they got a green signal from major opposition parties.

However, Opposition leaders said it was a matter the government itself could decide and BNP was unnecessarily trying to make it an election issue.

Though the Bangladesh government has cited electoral reasons for not taking a concrete decision on Tata's business proposal, the local media has not taken it kindly.

Criticizing the Khaleda Zia government's mishandling of the offer by India's Tata Group to invest $ 3 billion, several newspapers said that the negotiations should be kept alive and the government should not succumb to political and electoral compulsions.

The media, by and large, was critical of the government for foot-dragging on the issue till the political situation came to be influenced by electoral calculations.

Local daily, The Daily Star, was the most vocal among the government's critics saying, The way we handled Tata's proposal does not send the best of signals.

The reason given by the giant industrial conglomerate (Tata) is not of their own making; it is of Bangladeshi origin: Our government's inability to take a decision on the proposal before the forthcoming general election, the newspaper said in an editorial.

This is no reflection, we would like to deduce, on the merit or otherwise of Tata's proposal but rather the timing it has been foot-dragged to, by the procrastination and indecisiveness of our government of the day, it observed.

Has the latest submission from the giant industrial house received due consideration of the government? If so, what stopped them from responding to it one way or the other? If it was not in the best interest of Bangladesh, could that not have been conveyed to them so as to solicit further modification if it was deemed entirely unavoidable? it queried.

Pointing that political compulsions weighed with the Bangladesh establishment, not with Tata, the editorial further said, We have withheld our decision for political reasons but Tata, it is worthwhile to note, did not link it to political consideration or to any preference for a particular party government. It is in the fitness of things that multi-billion dollar investment proposals with long-term gestation are seen purely as momentous economic engagement having nothing to do with the changing of guards or vagaries of politics in a country.

That is primarily because such deals are struck with the state, not the government, it said.

India Energy Investment