Bangladesh: Draft coal policy finalised

Bangladesh: Draft coal policy finalised

16th December 2007

by The Daily Star

The final draft of the coal policy discourages aggressive development of the country's coal sector and places national bodies into the driving seat to lead the sector by pushing private and foreign investors into the backseat.

Under this policy, private companies will not have sole ownership over any coal mining deal. They must come in as partners with a national coal mining company.

The committee on reviewing coal policy finalised its report on Friday clearing some ambiguities in the policy.

For instance, the committee opted for maintaining the existing coal development royalty rate against the earlier suggestion to increase the rate.

The 10-member committee agreed not to increase the royalty rate considering the fate of the country's lone coal mine of Barapukuria, which would become bankrupt with the increased rate.

The earlier suggestion was to increase the royalty to over 20 per cent from the existing five to six per cent. A coalmine developer has to pay corporate tax at the rate of 35 per cent in addition to paying the royalty.

The committee however suggested that a committee headed by a state minister or equivalent rank will evaluate and adjust the royalty issue in the future. Other stakeholders of the coal sector would participate in such a committee.

The committee also deleted a part of the draft policy that bars giving any tax holiday to a mining company. Instead, it left the matter to the government to decide on such a kind of incentive.

The policy promotes the concept of creation of a national coal body, which may be named "Coal Bangla", to spearhead coal mining.

Headed by ex-VC of BUET Prof Abdul Matin Patwari, the committee also feels that the government, through the Petrobangla and private partnership, may spearhead one such open pit mine as a test case.

Petrobangla last year applied for a licence to explore the Dighipara mine. Once the Bureau of Mining Development (BMD) of the energy ministry issues it a licence, Petrobangla is expected to find a strategic partner from foreign or private coal developers.

The policy does not restrict open pit mining, as was initially demanded by some pressure groups. Instead, the policy identifies mining methods as technical issues that should be decided on the basis of technical viability and individual cases.

Though the committee believes that quick action is required to tap the coal resources as the country faces a huge energy crisis from 2015, "its go-slow approach with foreign and private investment puts a burden on the government," said a committee member.

The committee report will be sent to the energy ministry, which will then be forwarded to the caretaker government's cabinet for approval and adoption.

The draft policy says that if Bangladesh's GDP remains as low as 5.5 per cent till 2025, the country needs to generate19000 megawatt of additional power. If the GDP is as high as 8 per cent, it would need 41000 MW of power.

But at the same time, Petrobangla has said that 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 resources should play a role.

The policy adds that to meet power demands in a GDP growth rate scenario of 5.5 per cent, Bangladesh will need 136 million tons (mt) of coal till 2025. If the GDP rate is 8 per cent, the country will need 450 mt of coal.

The draft says that the country's four existing coalfields of Barapukuria, Phulbari, Khalashpir and Dighipara can cater to this need till 2030 or so. Of these only Dighipara is being mined at present.

The country's lone coalmine is an underground mine producing around half a million ton of coal a year. The financially troubled mine may be able to produce up to one million ton a year in a best-case scenario.

The committee on reviewing coal policy was formed in June after the sixth draft version of the national coal policy drew vast criticism for being self-contradictory. It was also criticised for not being investment-friendly.

It held it's first meeting one month after its formation.