New Delhi, Aug. 26: The government has asked power utility NTPC Ltd to consider a joint venture project in Pakistan on the lines of a plant it is building in Bangladesh.
“We have been asked by the government to consider a power project in Pakistan. We will study the issue and if it works out, set up an electricity plant on the same lines as our projects in Bangladesh and Sri Lanka,” said Arup Roy Choudhury, chairman of NTPC, in an interview to The Telegraph.
Islamabad had earlier tried to buy 500 megawatts and gas from India, sending several delegations to hammer out an agreement.
The trade deals are vital to Pakistan, which is in the throes of an economic and energy crisis. The deals were put on the backburner after five Indian soldiers were slain by a sneak attack by the Pakistan army on the Kashmir border.
“The Bangladesh project will be the benchmark for any new foreign joint venture we enter. That project will kick-start soon… Prime Minister of Bangladesh Sheikh Hasina is expected to lay the foundation stone next month,” said Roy Choudhury.
India has a 50:50 joint venture deal with the state-run Bangladesh Power Development Board to set up a 1,320 megawatt project at Khulna. The Rs 8,000-crore plant will depend on high-grade coal imported through competitive bidding, possibly from Indonesia.
Besides, NTPC will export 250MW through a 125km transmission line from Behrampore in Bengal to Bheramara in Bangladesh from next month.
Sources said the NTPC’s Farakka unit in Bengal was the likely supplier of electricity, for which the Bangladesh government had agreed to provide a sovereign guarantee on payments.
The transmission line is linked to India’s power grid, providing an opportunity to NTPC to wheel power from the Khulna plant into India.
Analysts said there were dual considerations behind the government’s nudge to NTPC for a project in Pakistan.
Partly, it was an attempt to try to normalise relations with Islamabad; it was also in response to Pakistan’s desperate power supply situation, where factories and cities suffer near day-long black-outs.
Pakistan Prime Minister Nawaz Sharif has been reaching out to India to bring his country out of an economic morass.
According to thinktank Pakistan Economy Watch, the country grew less than 3.5 per cent last year, with inflation ruling above 9 per cent.
Fiscal deficit at 8.5 per cent of the gross domestic product last year is likely to miss the target for this year by a significant amount.
Foreign exchange reserves, too, have dipped and the currency is at an all-time low, forcing Islamabad to take a $5.3-billion bailout package from the International Monetary Fund, under stiff conditions.
The IMF is insisting on more reforms, including in electricity.
Many argue that trade and investment from India could help to boost the drooping economy with trade chambers optimistically placing potential investment from India at $50 billion.
Bilateral trade between the two countries now amounts to about $2.4 billion compared with India’s global trade of about $600 billion. The trade balance is heavily tilted towards India.
Another $4 billion is traded through third world nations such as the UAE and Singapore.
According to a report by the Woodrow Wilson International Center for Scholars, a normalised trade regime could rachet up trade to $40 billion.
Indian officials said their understanding was that Pakistan had finished the groundwork to give the “most favoured nation” status to India but was holding back such an announcement because of domestic political compulsions.
All WTO signatories are duty bound to give other signatory nations equal treatment while levying import duty under a clause that asks them to give each other MFN status.
However, despite signing the WTO agreement, Pakistan had for the last 15 years dithered on granting India the MFN status though India had granted Pakistan such a status in 1996. The move is expected to reduce high tariff walls against Indian goods, which force trade with Pakistan to be conducted through third nations.