Footdragging on the passage of the draft national coal policy continues with the law ministry withholding yet its much-awaited vetting. As a result, some important investment decisions are now facing a great deal of uncertainty. The law ministry is now suggesting that the energy ministry should formulate an act instead of a policy. In support of its contention, the law ministry said the existing Mines and Mineral Rules 1968 is an age-old act and it has not been amended as yet to give a boost to efforts for development of the coal sector. Some sections of the draft coal policy, the law ministry pointed out, contradict the existing rules. Under the draft national coal policy licences for exploration or extraction from any coal-field will be awarded through open tenders, whereas the existing rules say that the licences would be awarded on first-come-first-served basis.
Besides, the draft policy says that a proposed coal sector development committee will fix the royalty rate whereas the mining rules say that the royalty on coal extraction would be 6.0 per cent for open-pit mines and 5.0 per cent for underground mines. The existing rules have certain number of flaws and deficiencies that need amendment. But the energy ministry said that an act is necessary for a specific issue but the energy ministry was working to help promote development of the coal sector as a whole by formulating the national coal policy first. The ministry for the last several years concentrated on preparing only the national coal policy leading to keeping several billion dollar investment proposals, in abeyance. It was anticipated that adoption of the policy would give a strong and pro-active signal to initiating efforts, in reality, for large-scale development of the country’s coal sector.
Now the questions arise: why was the government silent for all these years about preparing an act first instead of a policy? Why the law ministry did not instruct the energy ministry to prepare an act at the first instance? Does it look good that the two line ministries, as it appears, should be at loggerheads over this issue? Will the hard labour of the energy ministry officials to prepare a draft coal policy for all these years go in vain? These are the pertinent questions that need to be answered. This sudden but — and unpalatable — decision has caused further setback to the already pending foreign investment proposals worth around US$ 5.0 billion to develop the country’s coal sector. The companies eyeing on adoption of the coal policy for their investments include UK-based GCM Resources (formerly known as Asia Energy), Indian business conglomerate Tata group, South Korea’s Luxon Global and US-based Global Vulcan Energy.
Pending investment proposals with the Board of Investment (BoI) include a $2.5 billion project from GCM Resources, a $1.6 billion venture from Global Vulcan Energy, a $1.5 billion investment from Luxon Global and a portion of the $3.00 billion earmarked from Tata. Among the foreign companies, GCM Resources proposed in October 2005 the development of an open-pit coalmine at Phulbari with a 1,000-MW mine-mouth power plant. Before submission of the investment proposal, GCM Resources conducted a feasibility study on the Phulbari project at the cost of $18 million. Tata plans to spend a portion of its $3.0 billion investment proposal placed in April 2006 for developing the open-pit Barapukuria coalmine with a 300-MW mine-mouth power plant. Tata’s proposal also includes investment in steel and fertiliser plants. Global Vulcan Energy signed a memorandum of understanding with the BoI in 2005 to invest $1.6 billion to develop a coalmine at Jamalganj and set up a mine-mouth power plant. The US company also proposed to set up two organic fertiliser plants in Bangladesh.
Luxon Global placed its investment proposal and signed a MoU with the BoI in July 2005 intending to develop a coalmine, a mine-mouth power plant, a fertiliser factory and a liquefied natural gas plant. Since the first such proposal was placed to the BoI in May 2005, the successive governments have been holding up the same on the ground of adopting a relevant policy first. In fact, the draft coal 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 will face a big energy crisis from 2015, its go-slow approach to foreign and private investment proposals will compound the problem further.
The draft policy says that if Bangladesh’s GDP remains as low as 5.5 per cent until 2025, the country will need to generate 19000 megawatt of additional power. If the GDP growth rate rises to as high as 8.0 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 tonnes of coal until 2025. If the GDP growth rate accelerates to 8.0 per cent a year, the country will need 450 million tonnes of coal. The country’s four existing coalfields of Barapukuria, Phulbari, Khalashpir and Dighipara can cater to this need until 2030 or so. Of these, only Dighipara is being mined at present.
The draft policy does not pay much attention to the scope and necessity for developing and harnessing alternative energy sources, including renewable ones. And it was not expected to do that. A national energy plan has to deal with all such issues. However, there is no denying that, coal can only be one ingredient in a country’s energy mix. Hence, the coal policy has to be an integral part of an overall comprehensive energy strategy covering all existing and potential renewable and non-renewable energy sources.
Besides, the draft policy says that a proposed coal sector development committee will fix the royalty rate whereas the mining rules say that the royalty on coal extraction would be 6.0 per cent for open-pit mines and 5.0 per cent for underground mines. The existing rules have certain number of flaws and deficiencies that need amendment. But the energy ministry said that an act is necessary for a specific issue but the energy ministry was working to help promote development of the coal sector as a whole by formulating the national coal policy first. The ministry for the last several years concentrated on preparing only the national coal policy leading to keeping several billion dollar investment proposals, in abeyance. It was anticipated that adoption of the policy would give a strong and pro-active signal to initiating efforts, in reality, for large-scale development of the country’s coal sector.
Now the questions arise: why was the government silent for all these years about preparing an act first instead of a policy? Why the law ministry did not instruct the energy ministry to prepare an act at the first instance? Does it look good that the two line ministries, as it appears, should be at loggerheads over this issue? Will the hard labour of the energy ministry officials to prepare a draft coal policy for all these years go in vain? These are the pertinent questions that need to be answered. This sudden but — and unpalatable — decision has caused further setback to the already pending foreign investment proposals worth around US$ 5.0 billion to develop the country’s coal sector. The companies eyeing on adoption of the coal policy for their investments include UK-based GCM Resources (formerly known as Asia Energy), Indian business conglomerate Tata group, South Korea’s Luxon Global and US-based Global Vulcan Energy.
Pending investment proposals with the Board of Investment (BoI) include a $2.5 billion project from GCM Resources, a $1.6 billion venture from Global Vulcan Energy, a $1.5 billion investment from Luxon Global and a portion of the $3.00 billion earmarked from Tata. Among the foreign companies, GCM Resources proposed in October 2005 the development of an open-pit coalmine at Phulbari with a 1,000-MW mine-mouth power plant. Before submission of the investment proposal, GCM Resources conducted a feasibility study on the Phulbari project at the cost of $18 million. Tata plans to spend a portion of its $3.0 billion investment proposal placed in April 2006 for developing the open-pit Barapukuria coalmine with a 300-MW mine-mouth power plant. Tata’s proposal also includes investment in steel and fertiliser plants. Global Vulcan Energy signed a memorandum of understanding with the BoI in 2005 to invest $1.6 billion to develop a coalmine at Jamalganj and set up a mine-mouth power plant. The US company also proposed to set up two organic fertiliser plants in Bangladesh.
Luxon Global placed its investment proposal and signed a MoU with the BoI in July 2005 intending to develop a coalmine, a mine-mouth power plant, a fertiliser factory and a liquefied natural gas plant. Since the first such proposal was placed to the BoI in May 2005, the successive governments have been holding up the same on the ground of adopting a relevant policy first. In fact, the draft coal 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 will face a big energy crisis from 2015, its go-slow approach to foreign and private investment proposals will compound the problem further.
The draft policy says that if Bangladesh’s GDP remains as low as 5.5 per cent until 2025, the country will need to generate 19000 megawatt of additional power. If the GDP growth rate rises to as high as 8.0 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 tonnes of coal until 2025. If the GDP growth rate accelerates to 8.0 per cent a year, the country will need 450 million tonnes of coal. The country’s four existing coalfields of Barapukuria, Phulbari, Khalashpir and Dighipara can cater to this need until 2030 or so. Of these, only Dighipara is being mined at present.
The draft policy does not pay much attention to the scope and necessity for developing and harnessing alternative energy sources, including renewable ones. And it was not expected to do that. A national energy plan has to deal with all such issues. However, there is no denying that, coal can only be one ingredient in a country’s energy mix. Hence, the coal policy has to be an integral part of an overall comprehensive energy strategy covering all existing and potential renewable and non-renewable energy sources.
The Financial Express, Bangladesh
Date: 03/07/08
Link: http://www.thefinancialexpress-bd.info/search_index.php?page=detail_news&news_id=38530
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