The government is likely to shelve much talked $8 billion Sonadia deep seaport project as it is planning to set up Matarbari deepwater port nearby in the Bay of Bengal, officials said.
The government recently okayed Japan's proposal to finance and build a seaport in Matarbari, located some 25 km from Sonadia, where Beijing had offered to construct the country's first deep water port, officials said.
Such a decision would be a setback for Chinese President Xi Jinping's "One Belt One Road" initiative to build a network of ports and expressways and help expand trade, investment and influence in the region, said to analysts.
The Japan International Cooperation Agency (JICA) had offered 80 per cent financing on easy terms to build four coal-fired power plants of 600 MW each and a port complex in Matarbari.
That offer prompted a review of whether the Sonadia project was needed at all.
Matarbari is designed in such a way that it will be comprehensive, with power plants, an LNG terminal and a port. It is sufficient, and the government may have to give up the other port project," a senior official at Planning Ministry said.
Two Japanese companies, Sumitomo Corp and Marubeni Corporation, have bid to participate in the power plant construction project.
The project is in the early stages, and nothing has been decided. JICA said a loan agreement had been signed with Bangladesh for the power plant and that the project was in the procurement stage.
JICA, the main conduit for Japan's overseas development aid, had offered $3.7 billion at an interest rate of 0.1 per cent over 30 years with an initial 10-year grace period to build the $4.6 billion port and power complex in Matarbari, officials said.
"We are going ahead with the Matarbari seaport and power plants as JICA is financing the project," Reuters in a report released on Thursday quoted Shipping Minister Shahjahan Khan as saying.
But he said that there was no plan to sideline China and Beijing remained a key player in the country's efforts to build new roads and bridges.
Japan and India have been vying for influence over smaller nations in South Asia that sit astride vital shipping lanes, amid concerns about Chinese naval forays into the region.
State-owned China Harbour Engineering Company was the front runner for the contract to build the Sonadia port, and last year the two sides were expected to seal an agreement during the visit of Bangladesh Prime Minister Sheikh Hasina to Beijing.
But officials in Dhaka said financing was an issue, as Beijing was willing to offer only partial support for what would be Bangladesh's biggest foreign investment.