Draft coal policy incorporates new formulas for export, royalty rate: Differences remain over mining

Draft coal policy incorporates new formulas for export, royalty rate: Differences remain over mining method

Staff Correspondent, NewAge

12th May 2007

New formulas for reduced export of coal and higher royalty rates have been incorporated in the draft coal policy but disagreement among energy experts and officials continues over the mining method.

The energy division committee on review of the draft coal policy, headed by Wahidunnabi Chowdhury, an additional secretary, has agreed to the new export formula recommended by noted energy expert, Professor Nurul Islam of Bangladesh University of Engineering Technology.

The committee, however, is still reluctant to accept Professor Islam's recommendation that open-pit mining method should be banned for any company until the government itself tries an open-pit mining project by engaging foreign contractors to assess its viability in the country in the next 10 years.

'The committee is reviewing the recommendations on the draft of the policy and is likely to finalise the draft soon,' said a high official of the division.

As per the new export formula recommended by Professor Islam, any local or foreign company, engaged in mining at a coalfield, will only be allowed to export equal amount of coal the mine-mouth power plant will consume.

As per the draft policy, any company that will be allowed to mine has to set up a power plant at the mine mouth.

The previous formula for export suggested that a company could be allowed to export double the volume of coal that would be consumed in the country for the first 10 years after the policy comes into effect. It also suggested allowing the company to export the same amount of coal that would be consumed in the country annually 10 years after the policy comes into effect.

According to the previous formula, the proposed ratio of domestic consumption and export was 1:2 in the first 10 years and 1:1 after 10 years.

'The basic difference between the previous and new formula is that a company will only be allowed to export coal based on the consumption by mine-mouth power plant whereas earlier it was based on the company's total domestic sale of coal including the consumption of mine-mouth plant,' said a source in the division.

The committee also changed the formula on royalties on coal export by fixing the non-variable royalty rate at 10 per cent, which was 6 per cent earlier. The variable portion of the formula, however, remains same with the base price of coal at $25 per tonnes.

As per the new formula the government would get a 30 per cent royalty based on the current coal price of $75 per tonne in international market.

According to the formula, the royalty will increase by one per cent for an increase of coal price by $2.5 in international market.

An estimate of demand for coal for power production and other purposes was also included in the draft policy as per the recommendations of Professor Islam. The country will need around 449 million tonnes of coal only to produce power till 2025 whereas the total demand will be around 650 million tonnes by then.

The policy also included recommendations on formulating separate laws on resettlement of the people to be displaced from the coalmine area, management of soil of different layers, acid mine drainage materials and setting up of offices of the Department of Environment near the coalmine sites.

Sources in the division said representatives from the division went to Professor Islam several times in last one for clarification of some of his recommendations he had made as per the request of the prime minister's office during the previous BNP-led government.

They said that in talks with some committee members he had also made some additional recommendations including a ban on open-pit mining by any local and foreign companies for at least 10 years to assess the method's viability in the country.

When contacted, Professor Islam told New Age on Friday that he thought the open-pit method was not viable in Bangladesh because of high density of population and environmental problems.

He, however, said that the proposed coal authority of the government, Coal Bangla, should undertake a project for open-pit mining and the government should provide the fund for the project.

The Coal Bangla will observe the trends of water extraction and re-injection of water and environmental impacts of open-pit mining. 'If it is found that open-pit is viable, only then the government can invite foreign companies to mine with that method,' he observed.

'It will take time as there is no law relating to resettlement of people. The DoE has no institutional strength to monitor such huge projects. The supervising authority-the Bureau of Mineral Development-has to be strengthened and above all the proposed Coal Bangla will have to be set up,' Islam said.

Energy officials, however, said that in the policy they had already recommended, the state-owned companies would get preference in mining coal and if the government could provide funds the companies would take up a project on open-pit mining.

'But, we also have to consider whether the government could provide such huge funds to be required for operating an open-pit mine,' said an official.

The committee members, however, said that there should be no bar on any mining method in the policy. Nor should it recommend any particular mining method. An expert committee will decide on the mining method taking into account the geological, social and other aspects, they viewed.

The committee is also working on provisions for fixing power price for a mine-mouth plant after energy adviser Tapan Chowdhury last week wanted such provisions in the policy.

The price of power generated by a coal-based plant will be much higher than that of gas-based plants.