Bangladeshi and Indian electricity companies have signed a deal to build a $1.5bn (£950m) plant to help address Bangladesh's chronic power shortages.

The coal-fired plant will produce 1300 megawatts of electricity, about one fifth of the country's daily needs.

Bangladesh relies on old gas-fired plants for its power and experiences daily electricity shortfalls.

However environmentalists say the proposed site for the plant is too close to famous Sundarbans forests.

They argue that discharge from the power plant, like sulphur dioxide and fly ash, will have disastrous consequences for the fauna and flora of the mangrove swamps - a Unesco World Heritage site.

"If excess pressure is put on the [Poshu] river, that means less water for Sundarbans, which will mean that it will have a definite negative impact on the forests," environmentalist Rizwana Hossain told the BBC.

However, officials say they will take steps to mitigate the impact of the planned plant on the environment.

Sunday's deal was signed in Dhaka by Bangladesh's Power Development Board and India's National Thermal Power Corporation.

The Bangladeshi government says it needs to build more stations to meet the country's growing demand for electricity.

Erratic supplies have been blamed for hampering industrial production and economic growth.

Last November Bangladesh signed a deal with Russia for two new nuclear plants, which should produce 1,000 megawatts each when they come online in 2018.

Source :bbc.co.uk