Overview of Tata investment proposal

Looking broadly and based on whatever information is publicly available, the proposal is divided into three groups of investment: power, steel, and fertiliser. The power and steel investments appear to be complementary, and if coal from North Bengal is selected as the energy source, there should not be any gas requirement for these two sectors. Gas will only be needed as a raw material for fertiliser production.

Logically, with the high grade coal source now under development (not the Chinese one), the possibility of coal based sponge iron production using Indian iron ore may be quite feasible. Tata's and other facilities exist in India producing sponge iron using coal of lesser quality. The sponge iron can then be converted to liquid steel in electric arc furnace. Power for the arc furnace can come from coal fired power plants, possibly envisaged in Tata's technical ideas. Downstream steel products could be billets, HR coils, and structural sections, both for local market as well as surplus export to India or nearby countries. The coal-based power plants could be set up to provide all the power for the proposed steel industry, as well as surplus to meet the ever-expanding and unfulfilled power demand of Bangladesh, and maybe possible export to India after meeting local needs.

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It is the fertiliser plant with its location somewhere in Chittagong that will need both power and gas supplies. For this possibly Tata envisages requirement of gas not only as a raw material but also as fuel for the power plant dedicated to fertiliser production. Possibly this facility will be the one consuming most of the gas.

Location wise, selecting a river frontage around Ishurdi for the steel plant seems logical. Broad gauge railway transport with interchange with India railways across Darsana will be the route for around 3 million plus tons of iron are per annum. This will definitely need track upgrade and expansion of rolling stock and traction power requirement to cater for this volume of traffic. The board gauge railway in Bangladesh, so long ignored compared to the meter gauge will need revival and upgrading. However the issue of locating the steel plant should consider the Harding Bridge bottleneck, with a single track. Possibly this bottleneck could be minimised by locating the steel complex on the south bank of Padma river only where suitable round the year draft for barge sailing is possible. With such a location none of the ore needs to cross the Harding Bridge. Only coal for the DR plant and finished steel required for the north will need to cross the Harding Bridge. Power can be generated close to the coal mine, and the power can be transmitted across the Padma river for use in the south west as well as the steel plant.

Finally to protect our interest and at the same time not to be negative about Tata's investment proposal, we should opt for the coal route both for power generation and direct reduction route to steel making, as this does not need natural gas as an input. The issue of gas for the process and power requirement for fertiliser production can be looked in its own merit, basing the gas price in line with international tariff and possibly considering the Indian cost of effective heat equivalent of their source of energy in the power, steel, and fertiliser sector as a guideline. However, continuity of gas supply is a fact of life, and no investor can risk his capital against an uncertain source of this basic input.

I hope we scan the proposal with a positive attitude, and negotiate the deal on a win-win basis. This investment will have a positive spin-off to various other local subsidiary activities in production and services, and may well change the face of north west Bangladesh, which lacks development. Furthermore, it can act as a catalyst for further investment in other sectors both from Tata and other multinational conglomerates.

The author is Engineering Director of the Partex Group and was head of Chittagong Steel Mill from 1972 to 1978.