In what may be seen as a huge set back for China, India has announced that it will strike a power deal with neighbouring Bangladesh.


Bharat Heavy Electricals Limited (BHEL), the state-run Indian manufacturer of a wide variety of industrial goods, has said that it will sign a contract with Bangladesh on February 28 for setting up a USD 1.6 billion power plant in Khulna District. BHEL issued a statement earlier this week, saying that it won the tender after beating out a Chinese competitor in the latest commercial tussle.

According to a senior BHEL official, it is a victory for them in real sense as China had successfully bagged some development projects in Sri Lanka. In recent times, various Chinese companies have started placing bids on important projects in South Asian countries in an attempt to corner India in its own back yard. As Bangladesh is a part of a Beijing’s “String of Pearls” plan, it becomes crucial for India to win the bid, explained the official.

After years of negotiations, it has been decided that the contract to set up a 1,320MW thermal power station in Khulna will be signed on February 28. Speaking at a press conference in Dhaka, a Bangladeshi official said that Harbin Electric International Company Limited of China lost the bid mainly on technical grounds. He said that although the Chinese company had successfully implemented some major power projects in Iran, Turkey and Indonesia in the past, it failed to convince the Sheikh Hasina government.

In Dhaka, senior spokesperson of Bangladesh-India Friendship Power Company Limited (BIFPCL) Anwarul Azim stressed that BHEL won the project because it was the lowest bidder. He also said that Exim Bank, the external lending arm of the Indian government, agreed to bear 70% funding of the project’s costs at a soft interest rate of around 1% above Libor – the leading global benchmark for pricing transactions. Currently, Libor stands at 1.13% for a dollar loan for a year. BIFPCL is basically a joint venture that has been set up for building the coal-fired plant.
For his part, Deputy Managing Director of Exim Bank David Rasquinha said that they were very positive and bullish about the Khulna project. He congratulated BHEL for winning the biggest foreign project (by an Indian power firm), saying that it was really difficult to beat Harbin.

In the last three-four years, both India and China have stepped up bids for infrastructure projects in South Asia, West Asia and Africa. Since becoming prime minister of India in May 2014, Narendra Modi has been pushing for a greater engagement with smaller neighbours mainly to counter China’s growing influence in the region. As far as Bangladesh is concerned, it was the second defeat for China, as the Asian giant had lost a port project to Japan in 2015. Japan had won the project by offering 80% financing on easy terms. A leading Japanese company is constructing the seaport within 25km from a USD 8 billion deep water port that Beijing was negotiating to build.
Meanwhile, the proposed power plant in Khulna will have two units of 660MW and generate electricity mainly for local consumption. In its recent report, the World Bank said that around two-fifths of Bangladesh’s 160 million people have no access to electricity. So, it is an important project for a country, like Bangladesh, and a tactical victory for India over China.

Koushik Das, based in the Indian capital of New Delhi, is a senior news editor with more than 15 years of experience. He also runs a blog - Boundless Ocean of Politics. E-Mail: [email protected]