* A major breakthrough for India in Bangladesh
* India, China regional rivalry heating up
* Indian govt offers easy financing for power plant
* Bangladesh seen as part of China's "String of Pearls"
By Sankalp Phartiyal and Ruma Paul
NEW DELHI/DHAKA Feb 22 (Reuters) - A state-run Indian firm is poised to seal a contract to build a $1.6 billion power plant in Bangladesh, beating out a Chinese competitor in the latest commercial tussle between the region's two dominant powers.
After China's recent success in pushing development projects in Sri Lanka, a breakthrough in Bangladesh would be welcome news for Indian officials who have long fretted over Beijing's encroachment on to territory it considers its own back yard.
India believes Bangladesh is a part of a "String of Pearls" China is building across the Indian Ocean that stretches from Gwadar port in Pakistan to Djibouti on the African coast where it is building a naval base.
After years of negotiations, India's Bharat Heavy Electricals Ltd (BHEL) will sign a contract to build a 1,320-megawatt (MW) thermal power station in Khulna in southern Bangladesh on Feb. 28, officials in New Delhi and Dhaka said.
China's Harbin Electric International Company Ltd, which has power projects in Iran, Turkey and Indonesia among others, lost the bid on technical grounds, said a Bangladesh official, speaking on condition of anonymity since he was not authorised to talk to journalists.
But Anwarul Azim, a spokesman for the Bangladesh-India Friendship Power Company Limited, a joint venture set up to build the coal-fired plant, said BHEL was the lowest bidder.
The Indian government's external lending arm, the Exim Bank, has backed up BHEL's offer with nearly 70 percent funding of the project's costs at a soft interest rate of around 1 percent above Libor, the leading global benchmark for pricing transactions, an Indian government official said.
He declined to be named, saying the two sides were about to seal the contract.
On Friday, Libor stood at 1.13 percent for a dollar loan for a year.
"Exim is very positive about it, very bullish about it and looking to taking this forward," David Rasquinha, the bank's deputy managing director, told Reuters of the Khulna project.
It would be the biggest foreign project by an Indian power firm, eclipsing a plant already built in Rwanda and a planned one in Sri Lanka.
Officials at China's Harbin who dealt with the bid were not immediately available for comment.
But an employee in the after-sale service department said: "The company has been involved in many such tenders, it is very normal - either we win or lose the bids."