The Tata Group submitted an unsolicited ( BOI or Bangladesh Govt. did not at any stage make any public invitation seeking investment in any or all of the three sectors) Expression of Interest (EOI) to the Board of Investment (BOI) for making an investment of 2.5 billion dollars (subsequently raised to 3 billion) in (1) one integrated Steel Plant of 2.4 million tonnes capacity, (2) one 1000 MW gas fired power plant and (3) one Fertilizer Plant of 1 million ton capacity on 13th October, 2004.

Tata Group reportedly did not submit any comprehensive proposal supported by any detailed study, as it is a standard practice, for each of its proposed investment projects. They even did not submit any pre-feasibility report to the Ministry/authority concerned of the BOI. Industry sources say that the traditional consultants of the Tata group M.N Dastur & Co was not hired this time at any stage.

What Tata really submitted was a Status Update on April 15, 2004 after exactly six months of the EOI for the three proposed projects surprisingly jointly signed by three Managing Directors such as Mr. Firdose Vandrevala, Managing Director, Tata Power Ltd, Mr. Prashad Ragavan Menon, Managing Director, Tata Chemicals Limited and Mr. Balasubramanian Mathuraman, Managing Director, Tata Iron and Steel Company Limited ( TISCO) and not separately and independently as though these are one integrated project.

The BOI was never known to be an organization gifted with experience, and capability of examining any medium scale proposal of say 100 million dollars let alone any mega investment proposal for an integrated Steel project, huge Fertilizer project and a big power plant.

As such when the EOI was submitted BOI failed to guide the Tata team as to what was required to be done for submission of a comprehensive proposal so that the BOI could properly examine and consider the EOI . They, reportedly, became so overwhelmed on receiving the EOI that they even did not know that in the absence of qualified and experienced negotiators for properly examining and evaluating each of the Tata's projects BOI needed the services of three internationally reputed engineering consultancy companies from third country to assist them preparing the TOR for such mega proposal, evaluating and examining the proposal when submitted and assisting the client in every step when negotiating .

Tata negotiating teams, seasoned as they were and immensely qualified in international project negotiations, could immediately see and understand the weakness of the Bangladesh side and naturally had the upper hand from day one. As such they were pushing the projects ahead with speed, through its verbose, meeting and impressing people in the corridors of power of the immediate past government.

Many a people was wondering at that time as to the main intension of the most distinguished of the Indian corporate houses for its surprise decision to invest three billion dollars in Bangladesh specially when there was sea-change in the investment policy in India, which had adopted investment- friendly policies attractive to all investors. FDIs were allured to invest in India, local companies, corporate houses were given all kinds of facilities and support by the successive central governments and competitors of Tata, specially in the steel sector, were vying with each other for securing mining lease for iron ore and signing in MOUs with the state governments like Jharkhand, Orissa, Chattisgarh.

Why then Tata wants to set up plants in Bangladesh in stead of in India and that too not in any steel plant of a moderate scale and size but a huge one and in the Power and Fertilizer plants as well, for which they are not best known. No answer could this writer gather from those involved with the project from Tata side.

In view of the above I thought to share the following with the readers:

Do we need a mega steel plant ?
Tata's status update proposes setting up of an integrated steel plant through the gas based Direct Reduced Iron (DRI) Electric Arc Furnace (EAF) route with steel making and rolling facility of 2.4 million tonnes of Hot Rolled ( HR) steel. Does Bangladesh need such a big steel plant? Can Bangladesh afford to provide the facilities asked for by the Tata for setting up this plant? The government should ask this question to itself and before taking any hasty decision satisfy itself by undertaking a detailed techno-economic Feasibility Study by any internationally famous consultancy organization engaged in this field which may also prepare a master plan for the steel sector for guiding the future investors.

Whatever layman's knowledge I have in this field I am not sure if Bangladesh should go ahead with this project. I am unable to see why Bangladesh should agree to the production of such huge quantity of HR steel for which there is no market in the country. One may argue that Tata will export the excess quantity. In that case would it not be logical to question why Bangladesh should agree to the export of steel which used gas at a subsidised rate for somebody else's benefit? And why should Bangladesh agree to allocate 2000 acres of her scarce agricultural land for this huge plant and its township? The question should be seriously addressed by all concerned.

Bangladesh should very clearly tell the Tata that she may only agree to a (1) plant with a capacity to produce 1 million tonnes of steel the product mix ( certainly all will not be HR steel alone) of which should be determined keeping in view the demand of the country ( such as billets, slabs, plates etc) and (2) the location for such a plant can only be the well developed, Chittagong Steel Mills site which, with its 213 acres of land will be more than sufficient to accommodate a one million tonne integrated steel plant. But township as proposed by Tata's has unfortunately to be counted out as what is possible in India with its huge land mass is not possible in Bangladesh, with heavy pressure on land for alternative competing uses. In such a case the Tata group may be advised to submit a comprehensive proposal afresh along with the feasibility report.

Alternatively Tata's may also be advised to set up the Steel Plant in the CSM site and integrate it with the production plan of the Tata steel and to follow the same strategy which they are planning to follow for the newly acquired Corus Steel and trying to replicate at their Natsteel Singapore and Millennium Steel, Thailand facilities i.e. bringing in liquid steel to Bangladesh facility for production of finished products.

If the process is accepted I do not see why the investment outlay of the steel plant can be more than 200 million dollars. Not only that the construction period will be reduced to two years and Bangladesh will be spared of the complicated series of agreements for construction and modernisation of the railways and development of various other very complex infrastructural paraphernalia. Because in this case all imports and exports will be done through the Chittagong port and the dedicated CSM jetty at the riverfront of the CSM site.

I am unable to see why the erstwhile BOI did not see the steel project from advantages national point of view and why the product mix should be decided to the exclusive advantage of the investor.

The abrupt Tata proposal to invest three billion dollar in three plants and the negotiations that followed seem to be shrouded in a sort of mystery. The caretaker government should review the whole process of negotiations held in the past and if there were any lapses on the part of the BOI, it is time to set it right.

Ahmad Mujtahid is a journalist.