New Delhi: State-owned Bharat Heavy Electricals Ltd (Bhel) is in a dilemma. It wants to sell a 9MW generator to Tajikistan’s Pamir Energy project, but doesn’t want the National Bank of Pakistan, or NBP, to stand as guarantor.
Pamir Energy is co-owned by the Aga Khan Fund for Economic Development and the International Finance Corporation, or IFC, an arm of the World Bank. The letter of credit (LC) for the order to Bhel is to be issued by NBP. Bhel is opposed to NBP being the guarantor as it doesn’t want commercial ties with an entity from Pakistan, whose relations with India have soured following the Mumbai terror attack in November.
The LC is to be confirmed by Germany’s Commerzbank AG.
“The order is (for) a 9MW generator with a value of Rs10 crore. We want the issuing bank to be outside Pakistan because of the present turmoil...but they (Pamir Energy) are not agreeing to it,” said a Bhel executive, who didn’t want to be identified. K. Ravi Kumar, chairman and managing director of Bhel, confirmed the development.
Questions posted on the Aga Khan Fund’s website remained unanswered, though a confirmation that the questions had been received was emailed to Mint the same day stating, “Your enquiry has been passed on to the relevant department.”
According to information available on the Aga Khan Fund’s website, it will invest $8.2 million (Rs40.8 crore) in equity in Pamir Energy, while IFC will invest $8 million. The World Bank’s International Development Association is providing a concessional loan of $10 million to Tajikistan for the project. “They (Pamir Energy) say if the confirming bank is outside Pakistan, what is the problem? We want Commerzbank to issue the LC,” the Bhel executive added.
While commerce between India and Pakistan has grown in recent years, with bilateral trade amounting to $2.231 billion in 2007-08 from $344.59 million in 2003-04, India has now dropped all trade expansion plans with it.
The Mumbai attacks also compelled India to abandon plans to set up border posts to facilitate movement of goods and people to and from Pakistan, Bangladesh, Nepal and Myanmar, as reported by Mint on 5 December.
“Problems like these are bound to crop up when you go for international orders. They (Bhel) will have to sort this out,” said a Delhi-based analyst, who didn’t want to be named.
Of Bhel’s order book position of Rs1.25 trillion, global orders account for around Rs7,500 crore. West Asia, Africa and Central Asia are the primary international markets for Bhel, which plans to raise exports to Rs10,300 crore by 2012. Bhel posted a net profit of Rs2,859 crore on revenue of Rs21,401 crore in fiscal 2008. It has orders worth Rs24,000 crore in the current fiscal and aims to become a $10 billion-plus firm by 2012.