State of affairs about Phulbari coal mining

State of affairs about Phulbari coal mining

by Nuruddin Mahmud Kamal, Financial Express (Bangladesh)

24th March 2006

The Energy Advisor has dealt a severe blow to the ongoing evaluation of the proposal from Asia Energy Corporation (AEC) by declaring the coal exploration deal with Asia Energy as being incongruous with the national interests. The advisor has mentioned that the country's interest was not protected in the coal exploration deal with Asia Energy. Without elaborating the reasons for terming the deal so, the Adviser has quoted a provision of the agreement that "any coal which investor chooses to export, shall not be subject to export fees, duties or assessment of any kind". This [is] administrative adrenaline to a controversial proposal necessitates a reference to the context to evaluate such provision in the Agreement.

Now with such an evaluation of the AEC's proposal by a person no less than an Advisor to the Government, who would dare to be associated with any activities that may expose him or her to, who knows, even to a very grave charge?

The question that may arise as to how such an agreement (?) could get concurrence. The government of Bangladesh (GOB) has not yet published any white paper on the AEC deal for Phulbari coal mining, nor has the Ministry made the so-called agreements public. With the available information it appears that BHP was awarded a mineral exploration licence in August 1994 (as per statement of a former Director of BMD, Mr. M. Mominullah, published in a local daily on March 20, 2006) for the North western part of Bangladesh. This exploration licence was later (1998) assigned by BHP to AEC who, conducted seismic and drilling operations in Phulbari and estimated 572 million ton of bituminous coal at a depth ranging from 400 feet to 800 feet. On the basis of the field exploration and then client-financed evaluation by different groups of consultants, AEC has reportedly submitted a plan for open pit mining of Phulbari coal.

AEC is now contemplating to start open pit mining in Phulbari area on the basis of 6.0% royalty only, by the year 2007. It is claimed that environmental clearance for the said project has already been obtained. Foreign finance has been mobilised. In addition, they are going to collect money through initial public offering (IPO) in the local stock exchange market. All are, thus, set to go for the project whose nature has seriously been questioned by none other than the Adviser to the Energy Division.

The Advisor has admitted that BHP signed the agreement in 1995 while AEC took over the project in 1998. The grey area in his statement is whether any new agreement was signed with AEC in 1998 or they (AEC) were just the assignee of the agreement signed between the Bureau of Mineral Development (BMD) and BHIP in 1995.

If these were two separate agreements and if export provision was not in the agreement signed in 1995, but incorporated in 1998, then of course, the concerned officials must explain their conduct. The issue should not be mixed up. Also some officials should not also be shielded by saying that those involved during both the regimes are responsible for the two agreements for striking the deal against national interest. It is not clear how two agreements could be signed for a single project with two different companies at the same time? In any case, the issue needs to be dealt with, properly.

It may sound ludicrous to suggest that all concerned being responsible ones should dissociate themselves from such a deal any more. This is more so that the deal has been termed by a very responsible person as being against national interests. If must also be ensured that those who were responsible for such a deal either justify their stand or face charges as could be brought against them by the judicial process of the country. Under the present circumstances, it will be only befitting to review the proposed open pit mining and export of coal. Otherwise, there will be double standard involved in the process of the activities relating to the project.

It has been mentioned by the Honourable Energy Adviser that the deal should not be scrapped as it is an international agreement. But it must first be made clear whether the deal cannot and should not be termed as an international contract. The contract does not involve any international forum, institution or even an international company. It is an agreement between two local institutions -- namely between AEC and the Bureau of Mineral Development (BMD). Is it not a fact that the AEC has been formed in Bangladesh under the Companies Law as Asia Energy Corporation (Bangladesh) Pty Ltd.? So legally, it is a Bangladeshi company. As such no international convention will be at stake to deal with such a case. Further the deal was not made outside Bangladesh and no multinational or international agency was involved in the contract. For the irregularities of not abiding by terms and conditions of the contract, non-submission of the documents and returns in accordance with the Mines and Minerals rules of 1968 to the BMD, the question may be raised whether the agreement signed earlier by BHP or AEC does stand valid. The contract itself as mentioned by the Hon'ble advisor is asymmetrical. The AEC through BHP has taken advantage of the simplicity or stupidity of the other party i.e. BMD and incorporated conditions which will be detrimental to the interest of the nation. These, if analysed in the light of natural justice, should go in favour of Bangladesh to revisit its terms and conditions.

It will not be out of context to refer the case of Dhabol Power Plant Project in Maharashtra in India; when Maharashtra signed an agreement with Enron for installing power plants under an Independent Power Purchase (IPP) deal. After the election in India, the new government there re-examined the terms and conditions of the Dhabol Project and found that the contract was against Indian interest. The contract was scrapped with no consequences whatsoever for the Government of India.

In the light of what has been stated by the Honourable Adviser about the deal, will it be fair to proceed with it without a scratch? Incidentally, the draft Coal Policy itself now smells a rat due to the inclusion of provisions which appear to justify the 'wrong deeds' done earlier. It is necessary to revise the "proposed" coal policy as well.

What was happening concerning Phulbari coal was only part of the drama which was moving toward its climax. Now, even after knowing the fact, should a flawed proposal be implemented? That is a basic point for consideration.