New Delhi: State-owned Bharat Heavy Electricals Ltd ( Bhel ) has been allowed to bid for a contract to set up a $1.68 billion power project in Bangladesh, enabling India to muscle in on a potential Chinese move on the deal.

This comes in the backdrop of Prime Minister Narendra Modi’s planned visit to the eastern neighbour.

As part of India’s neighbourhood-first policy, which includes developing infrastructure in neighbouring countries, state-owned NTPC Ltd plans to build coal-based power projects in Bangladesh. Bids are to be called shortly for the 1,320 megawatts (MW) Khulna project—also termed the Maitree (friendship) project—that may have a final capacity of 2,640MW.

Allowing Bhel to bid for running the project marks a shift in plans for Bangladesh. Earlier, the Bangladesh Power Development Board (BPDB) wanted to put in a qualifying condition that the prospective bidder must have a 500MW running unit overseas.

This would have allowed Chinese, Japanese, Korean and European manufacturers to compete for the tender, but kept out Bhel. Mint reported on 31 January about India’s keenness to see Bhel being permitted to bid.

“Bhel has been allowed to bid," said a person aware of the development requesting anonymity. Another person aware of the development confirmed the news. A third person aware of the development, requesting anonymity, said: “It will be an international competitive bid and Bhel is eligible to bid for it."

Queries emailed to the spokespersons for India’s ministries of external affairs and power and BPDB remained unanswered at the time of going to press. A Bhel spokesperson in an emailed response said: “We would like to inform you that Bhel is unaware of any such development. As per the present announcement, bid submission date for the project is 16th July 2015."

While an NTPC spokesperson didn’t respond on the development, in an earlier response, the spokesperson had said: “The QRs (qualification requirements) for the bid documents shall be finalized and approved by the board of Bangladesh-India Friendship Power Co. Pvt. Ltd. Participation of Indian manufacturers along with other international players in the tender will be a matter of pride for all of us."

A Bangladesh government official, requesting anonymity, said: “The 500MW is not a precondition but a proposal. The idea is that this is a big project and those (power companies) with experience of big projects should handle this kind of a project. If those companies with experience of handling small projects like say 50MW or 100MW come with bids and we accept and then there is an accident due to lack of experience of operating big projects, then it will be disastrous. It is not about Bhel or any particular company. In fact, NTPC and Bangladesh Power Development Board are working together on this. So there is no question of putting in such a condition to disfavour Bhel."

This comes in the backdrop of Prime Minister Modi’s upcoming visit to Bangladesh on 6-7 June, after similar trips to South Asian neighbours Bhutan, Nepal and Sri Lanka.

India and China are locked in a race for resources as they seek to fuel their economic growth. But Indian efforts to step up its energy diplomacy by engaging with Myanmar, Bangladesh and Sri Lanka haven’t yet yielded results, partly because of domestic considerations.

China, on the other hand, has been able to wield the power of its growing economy without any such constraints.

India and Bangladesh are traditionally friendly nations, and Modi’s first visit to the eastern neighbour follows the unanimous approval by Parliament in May to implement a four-decade-old pact with Bangladesh that will allow the two countries to delineate their land boundary and exchange enclaves.

Bangladesh is India’s second largest South Asian trading partner, with bilateral trade in the first 11 months of 2014-15 at $5.7 billion.

NTPC and BPDB signed a joint venture agreement for the imported coal-based project in January 2012. Power purchase and implementation agreements were signed by NTPC in Bangladesh in April last year for the Khulna project, which is expected to be commissioned by 2018, with the entire power to be supplied to Bangladesh.

Elizabeth Roche contributed to this story.

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