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Saturday Feature
Sovereign guarantee or ceding of sovereignty ?
Enayet Rasul

          The news was highlighted in a leading daily newspaper of the country. It was a comment of the energy adviser, Mahmudur Rahman, in relation to the investment proposal of the Indian conglomerate Tata in Bangladesh. In the on going negotiations with Tata, the supply of gas has continued to be a big concern in the backdrop of Tata seeking an iron clad guarantee from the government of Bangladesh (GOB) about the supply of gas for their projects . While talking to a reporter of the paper on this issue the energy adviser was quoted as saying that Bangladesh would give Tata a sovereign guarantee of 20 years of gas supply even if that requires importing of gas should the country run out of it. If necessary, Bangladesh will import gas from Myanmar to meet Tata's requirements, said the energy adviser.
It is impossible not to question the intent of the energy adviser. Why should the country take extraordinary steps to facilitate the investment of a foreign company by sacrificing its vital national interests ? The use of the gas is rising fast domestically and even at the present rate of its consumption and given the present available reserves, the gas wells should run dry by 2015 or only a decade from now. In these circumstances, what great compulsions are there on Bangladesh to give a guarantee to Tata that it would be supplied with gas for 20 years come what may for the local users. ? As it is, Tata's negotiators demanded that Bangladesh would have to stop supplying gas to other consumers if that becomes necessary to keep supply of gas to it at the contracted level. And the energy adviser has publicly committed on behalf of the government to even import gas to feed Tata if that is needed. Therefore, it is only pertinent to ask why Bangladesh should be obligated to accept these very risky and unacceptable terms .
Tata also wants gas at subsidized prices. It cites the example of the KAFCO project in the eighties in this regard when any knowledgeable person in Bangladesh knows it that the KAFO project represents a very bad case of undermining of the national interest and all governments that followed the rule of former President H M Ershad accepted the great folly of allowing that project and seemed to be keen not to repeat the blunder by allowing similar projects in the future. But this consideration appears to have changed in relation to Tata. Tata is demanding gas at the price of $ 1.2 per cubic feet or the rate at which gas is supplied to KAFCO and government has not rejected this proposal. But the gas price with Tata should be fixed at least at $ 4 per unit so that the government does not have to substantially subsidise the gas price for Tata incurring huge annual losses.
As for the energy minister's remark that we would be even prepared to import gas from Myanmar for supplying the Tata projects, such imports will very likely cost Bangladesh $5 per unit which would mean a further boost in the subsidies to be provided by the government to go on supplying Tata. In what way would that be beneficial for the country or its foreign currency reserve ?
Tata is also likely to be benefited with a tax holiday for 10 years when the country's own industries get it for 6 years. Among the main reasons why foreign direct investments (FDIs) are sought is the injection of resources into a country. Taxes provided by the foreign companies are one such source of injected resources. If an internationally famous and resourceful company like Tata is provided with such a major concession in taxes right from the outset, that what is the great usefulness of this project from the country's economic perspective ? It is notable that both the National Board of Revenue (NBR) and Petrobangla, the two official bodies concerned with revenues and gas supply respectively, are not in favour of giving in to Tata's proposals as that could cause a serious financial drain for the country and endanger its energy security. But in all appearances, the pro TATA lobby in the government seems to be hell bent on pushing through to a conclusion negotiations with Tata at the fastest after accepting the most objectionable terms.
The only point that is touted again and again from a quarter is that the country can say that it has drawn a big FDI project by facilitating Tata's offer. But this is silly because the existing guidelines about FDIs clearly underscore that no FDI offer should be welcome if it is not in harmony with the country's vital economic interests. When these guidelines are being set aside so callously, then one is rightly tempted to say that the energy adviser's sovereign guarantee to Tata is really a case of ceding the country's sovereignty. There can be no other way to describe the noose that interest groups are forcing the country to wear in the name of foreign investment.


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