Under the 35-year deal India will start exporting power up to 500 megawatts to Bangladesh by late 2012. The deal was signed by the state-run power companies of India and Bangladesh.
"It's a landmark deal as far as we are concerned. It will help ensure energy security for our country and ease the acute power crisis," said Alamgir Kabir, the head of Bangladesh's Power Development Board.
The new deal shows Bangladesh's improving ties with India under its new secular government led by Sheikh Hasina.