Mine character should decide mining method
Working against its deadline of December 5, the committee on finalising the coal policy resolved that adopting open-pit or underground mining method should be left to technicalities of a particular project and coal resources should be primarily dedicated to power generation.
The committee that has held 16 meetings till yesterday since last July, is currently trying to resolve whether the royalty over coal development should be raised from 5-6 percent to a higher number, sources said.
Even though initially the committee faced opposing views about allowing open-pit mining, which enables huge extraction of coal compared to underground mining method. But as discussions cast light into the grim energy supply scenario of the future, the members more or less agreed to leave the matter to the technical viability of such mining.
Headed by Ex-vice-chancellor of Bangladesh University of Engineering and Technology (Buet) Prof Abdul Matin Patwari, the committee also feels that the government, through Petrobangla and private partnership, may spearhead one such open-pit mine as a test.
The committee believes a quick action is required to tap the coal resources as the country will face huge energy crisis from 2015.
The draft policy says if Bangladesh's gross domestic product (GDP) remains as low as 5.5 percent up to 2025, the country will need to add 19000 megawatt (MW) of additional power and if the GDP is as high as eight percent, it would require 41000MW power. However, Petrobangla said production of gas, which has been the key source for power generation, will start to decline from 2011. This is where the country's coal should play a role.
The draft coal policy said to meet its power demands in a GDP growth rate scenario of 5.5 percent, Bangladesh will need 136 million tonnes of coal up to 2025. If the GDP rate is eight percent then Bangladesh will need 450 million tonnes of coal.
The draft says that the country's existing four discovered coalfields of Barapukuria, Phulbari, Khalashpir and Dighipara can meet this need until 2030 or thereabout.
The country's lone coalmine is the Barapukuria underground mine, which is now producing around half a million tonnes of coal a year. The troubled mine may be able to produce up to one million tonne a year in a best-case scenario.
The committee was formed in June as the sixth draft version of a national coal policy drew a lot of criticism for being anti-investment and self-contradictory. It held its first meeting one month after its formation.
The 10-member committee that held dialogues with various stakeholders and opinion leaders stressed the need to have a national coal body like "Coal Bangla" that would lead coal ventures in the country.
Last week the committee had long discussions on the royalty issue. The present legal frame work demands six percent royalty on coal production from an open-pit mine, and five percent from an underground mine. It was long felt that this rate, fixed decades ago, has become irrelevant, as the global energy prices are at an all-time high.
The draft policy sought to increase this rate under a certain formula that can push the royalty beyond 20 percent in the present global coal market context. Potential investors and the Asia Energy have been opposing the idea saying that such royalty rates, added with corporate tax, will turn any coal venture into a failed effort.
In this regard, the committee assigned one of its members to gather data on global royalty rate trend. The data tabled last week showed that worldwide seven percent is the highest royalty rate. Any rate beyond that can make the coal production price too costly.
The committee also argued that increasing the royalty would be also applicable for the government-owned Barapukuria coalmine, which is unable to properly pay its five percent royalty. Earlier, the committee made a visit to that coalmine.
The committee last week also invited Asia Energy chief Gary Lye to hear his opinions on several issues, including exports, which is one of the main focuses of Asia Energy's Phulbari coalmine development scheme. The controversial company proposed to produce 15 million tonnes of coal a year from an open-pit mine in Phulbari that has 572 million tonnes of coal.
Lye told the committee that the company was interested in a market that would secure the return of its investment. Asia Energy would not be interested to export, if the local market can absorb the production.
According to Lye's written statement, Asia Energy says that it already sees a market of 12 million tonnes of coal a year. The Asia Energy had proposed to set up a 1,000MW power plant, which would demand three million tonnes of coal a year. Plus, the country's brick kilns demand around three million tonnes. Brickette (packed coal used for cooking and domestic use) industry can cater for household demands of another three million tonnes. And if the government okays an Asian Development Bank (ADB) proposal to set up another power plant, then another three million tonnes of coal can be sold.
Apart from this 12-million-tonne market, an investor friendly environment would encourage more power plants, which can consume the remaining coal of Phulbari's production, Lye said.
He, however, added that about 25 percent of the coal of Phulbari was high quality coking coal, which is used in steel industry and has very high price in the international market. Until Bangladesh has its steel industry, this coal should be exported instead of using it in brick kiln, he said.