Negotiators of Petrobangla turned down the proposal. Gas tariff for industries in Bangladesh is around $2.35 per mcf.

Petrobangla officials said such a low price of gas as offered by Tata is not acceptable in view of the present trend of rising oil price.

Tata negotiators said if the price of gas offered by them is not acceptable to Bangladesh, it might consider relocating its planned investment to Egypt, one source mentioned.

The company's officials argue that price of gas for large-scale investment in many countries like Algeria and Tunisia is $1 or less, and there is no relationship between the prices of oil and gas, said a meeting source.

The two sides will further discuss the gas price issue.

Yesterday's meeting mainly heard Tata's proposals. Its officials submitted a plan for Barapukuria coal mine, reiterated their proposed sovereign guarantee for gas supplies and took up issues concerning steel mills, captive power generation and fertiliser plant.

Petrobangla is likely to put forward its ideas and arguments at today's meeting, sources said.

Mosharraf Hossain Bhuiyan, chairman of Petrobangla, and Alan Rosling of Tata Sons Ltd, led the negotiators from the government side and Tata Group.

Mosharraf declined to say anything about the outcome of the meeting.

Manzer Hossain, Tata resident director, said they discussed coal and gas issues on a preliminary basis.

"We have placed before the government side international practices on how gas price is determined as a background. So, on that basis we will start talks tomorrow (Tuesday)."

He said the discussion held yesterday paves the way for further discussion today, and no decisions were taken on the day.

"Discussion was held on international practices now going on. Hopefully, from tomorrow onwards we should be in a position to see some kind of decisions emerging from the discussions," he added.

Meeting sources said that on Barapukuria coal mine, Tata reiterated its proposal for dismantling the existing underground mining and replace that with an open-cast mining, owned by it. But Petrobangla reiterated its proposal for a joint venture on Barapukuria mine and said Tata should work centring its (Petrobangla) proposal since a significant amount of investment has already been made on the existing underground mining.

"Besides, Tata is asking for information about gas field reserves. It is natural. But it is really difficult for us to respond to Tata's demand for a 20-year sovereign guarantee for gas supply. We are not sure at this point of time if we can give such a guarantee, especially when Tata's gas demand is quite high," a meeting source pointed out.

Petrobangla negotiators also urged Tata to keep the issues of coal, steel and power plants and fertiliser plant separate. But Tata is interested in negotiating these issues as an integrated proposal.