New Delhi: India’s plan to develop the Khulna power project in Bangladesh hangs in balance after differences emerged between the two sides over tariff and the use of Chinese equipment.

The Bangladesh Power Development Board (BPDB) does not want power tariff to exceed 4 taka ( 2.80) per unit, but India’s state-run power company NTPC Ltd says the project will become unviable at less than 3.50 per unit.

Watch Video

Mint’s Utpal Bhaskar says some states could face power blackouts because distribution companies are defaulting on their payments

Loading Video...

Bangladesh also wants Chinese power generation equipment to be used in the coal-based, 1,320 megawatts (MW) project at Khulna, which is Bangladesh Prime Minister Sheikh Hasina’s parliamentary constituency.

The project is crucial to India’s plans to improve its relationship with its eastern neighbour by boosting energy ties.

“They want Chinese equipment and expect the tariff not to go beyond 4 taka per unit. This is not possible," said a senior NTPC executive on condition of anonymity. “Our specifications don’t include Chinese equipment. Also, the quality of Chinese equipment is doubtful in the later years of operations."

File photo od a NTPC power plant

“We plan to conclude the feasibility report (FR) by end-December," the NTPC executive said. “The final outcome of the project’s future will be known by end-December. If they (BPDB) like it, well and good. If not, we wouldn’t be able to go ahead. We have taken a stand in our concluding meeting. The fate of the project will only be known after the FR is finalized."

An Indian power ministry official, requesting anonymity, confirmed the differences over tariff structure but said the “issue will be resolved". Power minister Sushilkumar Shinde has also said on Monday that matter will be resolved amicably. Bangladesh’s power development board had earlier raised objections to the project’s high capital cost as it could make electricity dearer, Mint reported on 7 November.

Enamul Hoque Chowdhury, minister (press) at the Bangladesh high commission in New Delhi, declined to comment because he was travelling.

“During the recent visit of BPDB officials to NTPC, discussions were held for finalization of feasibility report for Khulna project," an NTPC spokesperson said in an emailed response. “NTPC would be working on revision of draft feasibility report, based on the inputs received... The feasibility report is expected to be ready by end-December 2011.  The indicative tariff would be known only after completion of feasibility report."

During Hasina’s January 2010 visit to New Delhi, the two nations identified a number of infrastructure projects to be implemented under a $1 billion line of credit extended by India. NTPC plans to set up two imported coal-based power projects in Bangladesh, at Khulna and Chittagong, through an equal joint venture with BPDB.

“With regard to Chinese equipment, NTPC specifications do not prohibit participation by Chinese.  In any case, the specification of Khulna project would be decided by the JV company," the NTPC spokesperson added.

NTPC recently announced its overseas operations and maintenance entry as an operator for the 240MW Siddhirganj gas project in Bangladesh for six years.