New Delhi: As part of a growing attempt to improve political and economic ties, India has proposed to Bangladesh the setting up of a liquefied natural gas (LNG) terminal in that country in a joint venture (JV).

The proposed terminal will be used to create a power generation capacity of around 1,000MW.

Strengthening ties: Bangladesh Prime Minister Sheikh Hasina and PM Manmohan Singh during the former’s India visit in January. Pankaj Nangia/Bloomberg

The details of the plan would be decided after a Bangladeshi delegation visits India shortly to study the LNG terminals in the country.

“Since Bangladesh does not have any coal, we suggested to them to set up an LNG terminal either through a JV with India or on their own. They can then use the gas to generate power and then sell it to India through the transmission link we are building," said power secretary H.S. Brahma. “A delegation from Bangladesh will be visiting India shortly to take this forward."

While Bangladesh is short of power, with an installed capacity of 10,000MW, India has an installed capacity of 153,000MW, of which 16,822.85MW is gas-based.

India has two LNG regasification terminals. Both are located in Gujarat; one is owned by Petronet LNG Ltd (with a capacity of 7.5 million tonnes per annum, or mtpa) and the other by Shell India Pvt. Ltd (3.6 mtpa). The other terminals which are in the pipeline or at proposal stage include the ones at Dabhol (Maharastra), Kochi (Kerala), Ennore (Tamil Nadu) and Mundra (Gujarat).

“Both sides are discussing the proposal and the technical people are having meetings," said Enamul Hoque Chowdhry, minister, press at the Bangladesh high commission in New Delhi.

The proposal was made by the Indian government during Brahma’s visit to Bangladesh in February to hold discussions on a power plant that NTPC Ltd is planning to set up there, apart from other areas of energy cooperation.

“We had made this proposal to Tawfiq-e-Elahi Chowdhury, energy adviser to the prime minister of Bangladesh," Brahma said. “Since the current producing fields in Bangladesh are old and due to the low pressure, the domestic gas is not enough, there is a need for gas."

Bangladesh has substantial gas reserves of 135.8 billion cu.m but it has not been brought to commercial production as the country has resisted calls until now for the export of natural gas.

The developments follow the January visit of Bangladesh Prime Minister Sheikh Hasina that was part of the bid to upgrade the bilateral relationship.

New Delhi also wants to ensure closer cooperation so that Bangladesh acts against militant anti-India groups that have established bases on its soil, such as the Harkat-ul-Jihad-e-Islami, Jamaat-ul-Mujahidin, Purbo Banglar Communist Party, Bipplobi Communist Party and the Sarbahara Party.

Bangladesh plans to set up two coal-fuelled power projects of 1,320MW each, one of which, requiring an investment of around Rs6,600 crore, will be offered to state-owned NTPC, India’s largest power generation utility, to be developed in a joint venture with the Bangladesh Power Development Board. NTPC is also scouting for renovation, modernization, operation and maintenance opportunities in Bangladesh.

“This is a good proposal for both India and Bangladesh," said Rupesh Sankhe, an equity research analyst at Angel Broking Ltd. “This can be made operational on the same lines as the India-Bhutan power trade. Bangladesh has huge gas reserves but investments are not happening for its development."