Formation of this committee was announced on June 21 through a circular with a one-month deadline to complete its task but sources said its first meeting is expected to be held tomorrow.

The ministry has assigned the eight-member committee headed by former vice chancellor of BUET Prof Abdul Matin Patwari to scrutinise the sixth draft, make recommendations, finalise the draft and submit it to the energy ministry.

The committee could not meet so far as Patwari is on a tour abroad from last month. The caretaker government had earlier made Patwari head of another committee to scrutinise some power deals signed by the four-party alliance government.

The present committee includes Chairman of the University Grants Commission Prof Nazrul Islam, defence representative Maj Gen Ismail Faruk Chowdhury, journalist Ataus Samad, geologist Prof Badrul Imam, research director of Centre for Policy Dialogue Prof Mustafizur Rahman, Petrobangla director Moqbul-e-Elahi and Chief Executive Officer of Infrastructure Investment Facilitation Centre Nazrul Islam.

Finalisation of the coal policy is being viewed as very important since it will decide the fate of existing deals with Asia Energy or Hosaf and also of other offers now awaiting government approval.

Experts and officials believe that under a sound policy Bangladesh's coal resources can change the country's future where investment will be encouraged safeguarding national interest. Tapping coal resources would need billions of dollars of investment, they noted.

The sixth draft prepared by a committee headed by the energy ministry's additional secretary Wahidunnabi Chowdhury was found highly self-contradictory, while it left questions on crucial issues like open pit method of mining unanswered.

"It seems that the draft was prepared not from a national perspective but from the perspective of making Asia Energy's Phulbari coal mine deal as difficult as possible. This is why this draft appears to be so self-contradictory," said a geological expert.

Top energy ministry officials felt that this draft was becoming prohibitive as it was being influenced by a group of people nurturing ultra nationalism and reservations about private investment.

"This prompted the energy ministry to form a fresh committee to scrutinise this draft," one source said.

Critics say the draft will not seek amendments to the existing Mineral Resources Regulation 1968 and the Mines and Minerals (Control and Development) Act 1992 but its contents grossly contradict these legal frameworks.

For instance, the existing law and regulations fix coal development royalty at 5 percent if coal is tapped through underground mining and at 6 percent if tapped through open-pit mining. The draft on the other hand puts the basic royalty rate at 10 percent, assuming the basic price of coal at $25 per tonne. Then it adds 1 percent additional royalty on each $2.5 hike above $25. At the present international price of coal, this implies a royalty of over 25 percent.

Royalty rates in other countries swing between 0 percent and 13.5 percent. Some countries like Chile or Peru depend entirely on 30 to 35 percent corporate tax while countries like Indonesia put the rate at 13.5 percent with 30 percent corporate tax.

According to a Petrobangla expert, royalty rates are low in most countries because most of the coal deals are decades-old. "Those were formulated at a time when energy prices were low and the countries had different sets of values. Now, global energy price has gone up, and price of coal has also gone up significantly. Many countries are now considering higher royalty," he said.

"Royalty is separate from corporate tax. Tax is universal. Royalty is set on natural resources that we will continue to lose with mine development. Six percent is too low. But making a formula that seeks 25 percent royalty is absurd because this would be in addition to corporate tax for the investors. This has to be a win-win for all," he added.

Article 2.2 of the draft says that up to 2035, coal would be the primary source of power generation in the country and the existing reserve does not give any scope for exporting coal or using coal in for any other purposes. But other parts of the draft suggest that a developer can export the same quantity of coal it uses for power generation.

Coal experts say the present technologies can convert coal into many forms of energy which will have wider positive impact on the economy if that is encouraged. But the draft-makers did not seem to be aware of such technologies or other uses of coal.

The draft also demands that a mine developer must off-load shares in the share market from the day it starts commercial operation. Energy sector investors term such condition unrealistic.

"Quality of our coal is very high. When we are making a policy, we should recognise this fact and outline the policy accordingly. But this draft emphasised local use of coal to the degree of encouraging it for domestic or brick-field use. Instead, we can export this coal to get greater returns. We can use coal for petro-chemicals. There are other options to consider," said a coal expert.

Article 6.1 of the draft demands demurrage security deposit of 4.5 percent of the project cost at the beginning. This could greatly raise cost and hurt initial investment.