Coal Policy has become a hot topic of discussion for last two years in the country. Since mid 2005, when Mahmudur Rahman was assigned by the 4-party alliance government as Energy Advisor in addition to his BOI Executive Chairman’s duty, Coal Policy became his favorite subject. He successfully sold the myth that the country lacked the Coal Policy and with ‘his Coal Policy’ the energy crisis would be over. Mahmudur Rahman attracted enough attention of the media for his several controversial remarks and by demonstrating his close relationship with the 4-party government’s alternative powerhouse. But he miserably failed not only to deliver Coal Policy for which he invested almost his entire tenure as Energy Advisor but also to improve investment climate and energy supply in the country.

Soon after Mahmudur Rahman took charge as Energy Advisor in June 2005, he started talking the necessity for diversity of energy sources and attracting foreign investment in the sector. Instead of taking initiatives to improve the already existing Mines and Minerals Act and Rules, existing contracts and licenses accorded within the scope of the already signed contracts and regulations, he tried to portray that without Coal Policy there would be no coal and sustainable energy. He knew very well that Coal Policy can hardly be separated from the National Energy Policy and no policy can substitute the acts and rules in the country. 

The former Energy Advisor tried to offer ‘something new’ in the energy sector possibly to secure his name in the history ignoring the fact that the country cannot wait indefinitely with endless debates on Coal Policy. The National Energy Policy 1995 was totally ignored by him possibly because his predecessor AKM Mosharraf Hossain took initiative to update the National Energy Policy. Energy Division put significant efforts to make necessary amendments in the National Energy Policy 1995 which was released as amended draft in the website in May 2004 for discussions/opinions for further improvements but the amended version could not see the light.

As usual, with the changed leadership the Energy Ministry changed its focus and mobilized sufficient resources to prepare the Coal Policy. On August 15, 2005, Petrobangla, Energy Division and IIFC sat together to work out the philosophy of the ‘new’ Coal Policy and to find out avenues to engage IIFC for rendering technical assistance for preparing the draft Coal Policy. Following the initiative, a contract was signed with IIFC effective from 25 August 2005 for preparing the draft coal policy for Energy and Minerals Resources Division. 

The first draft Coal Policy was prepared and submitted to Energy Division by IIFC on December 1, 2005. Before the draft was prepared IIFC made several rounds of consultations with stakeholders, reviewed information of other countries. The document prepared was not a simple one and it incorporated not only energy and coal related policy issues but it also made recommendations for mandatory provisions for different government agencies and authorities. Some may criticize whether the draft Coal Policy should try to dictate other government departments and regulations. If so, whether the Coal Policy would synchronize or invite conflicts among government departments and their guiding regulations. Such proposals of Coal Policy were considered by industry insiders as utopian and impractical in the context of present world.

The Energy Ministry involving Petrobangla, BMD, GSB and IIFC made some discussions on the draft Coal Policy. Version 2 of the same document was made by IIFC and it was made public in the consultant organization’s website. On February 8, 2006 a daylong consultative workshop on the draft Coal Policy Version 2 was discussed by the stakeholders in a local convention center of the capital. Several pragmatic suggestions and opinions were gathered from various stakeholders including academia, investors, experts, development partners, sector specialists and concerned government departments. But the Energy Advisor’s stubborn attitude towards fixing royalty for coal (the proposed royalty rate is to be calculated on the basis of the difference between the international coal sell price and a ‘given value’ of per ton coal (US$25/ton), mandatory power plant development and restriction of coal export not by the technical and economic considerations but administrative instructions invited mixed reactions from the stakeholders. Anybody may calculate and discover that the Coal Policy suggested a royalty above 20% which is unique and unprecedented in the coal producing world. Some local conservationists considered the Energy Ministry move was to accommodate coal export and draining out national resources. On the other hand the mining sector specialists and investors were skeptic about the draft Coal Policy as it was a confusing document since it tried to ignore the technical and economic realities and imposed a lot of administrative restrictions for sector development and made practically no offer for attracting investment.

The Coal Policy draft also included mandatory power plant installation and restricted coal export provisions, competitive selection of investors for Greenfield area exploration and mine development. The input from the daylong seminar on draft Coal Policy from stakeholders were almost ignored and the Bangla versions were prepared almost without change for further procedural scrutiny like Law Ministry vetting and sending the draft for Prime Minister’s approval for placing it to the Cabinet. Energy Division forwarded the Bangla (version 5) draft Coal Policy to the Prime Minister’s Office on May 31, 2005 but received the document back with some questions for clarifications (including the questions about comparative royalty rate, export provisions of coal in different coal producing countries and major changes suggested in the draft compared to the existing Mines and Minerals’ Rules of the country). Energy Division sent the draft along with the clarifications to the Prime Minister’s Office again on June 26, 2006 (Version 5.1).

Instead of approval of the document it was sent for further review and comments to a BUET professor from the PMO. On August 9, 2006, a report on the draft Coal Policy was received by PMO from the BUET professor, who is known for his radical views in energy sector development with only government sector domination and conservation of energy resources instead of harnessing them. He often advocates for ‘energy security’ and suggests energy sector development excluding foreign investments taking no contingence of the fact that the mining industry is a capital incentive sector and Bangladesh can not at this stage fund or manage it with local resources. 

The PMO forwarded the observations received to Energy Division on September 21, 2006 for further review and corrections in light of the recommendations, observations. Energy Division asked Petrobangla to constitute a new committee on September 21 for further review and correction of the draft Coal Policy and a 5-member committee headed by Additional Secretary of the Energy Division Wahidunnabi was constituted for the purposes on September 27, 2006. 

The newly constituted committee could meet only on February 19, 2007 after the caretaker government took charge. The new Energy Advisor Tapan Chowdhury announced that he wanted the Coal Policy finalized within March 2007. But the Wahidunnabi committee along with newly formed committee members has been struggling hard to make changes picked up from the BUET professor’s recommendations. The version 6 of the draft Coal Policy is now prepared in March 2007 and it appears that more versions of the draft Coal Policy will be prepared. Already the prepared version 6 draft Coal Policy clearly shows major shifts from the previous documents including the declaration at the beginning that the ‘government sector should get preference in coal sector development’, coal sale will be allowed only in local currency and no incentive for private investment for risk investments in exploration and mining will be offered other than existing rules and regulations for other industries. In addition, the current draft prohibited international dispute resolution or arbitration provisions for investment contracts for coal sector exploration and development. The Wahidunnabi committee included a provision in the Coal Policy new draft that the local power sector consumption of coal should be considered as unaccounted consumption in local market so that coal export becomes impossible (as the new draft puts it, with prior approval investor may decide to export coal at a 1:1 ratio of coal consumption at the local market excluding coal used/supplied to power plants).

It is a common knowledge that other than power generation sector there will be no stable and bulk consumer market of coal. The committee also suggested restricting coal production volume and method of mining from a mine as per the convenience of the local researchers after they make a conclusion within next 5 years. This provision is not based on techno-economic justifications but as per the whims of the administrators. Also the current draft Coal Policy suggested Environmental Impact Assessment of the coal mine project after the approval of such project by the Energy Division, lease for mining is recommended for those who will ensure power generation from the date of coal production etc. Obviously, the Wahidunnabi committee ignored a very simple fact that investor’s business risks and technical aspects of a coalmine and its optimum size of production and their schedule are interlinked issues. And the Coal Policy legally cannot dictate what other government departments should follow other than their guiding rules.

If carefully reviewed one may clearly see the reasons behind such radical changes in the draft Coal Policy. It is the result of artificial inclusion of the BUET professor's recommendations (passed to Energy Division through PMO of the former government) in a document which was prepared from a completely different perspectives and philosophical guideline. The Wahidunnabi committee also realized that the ‘natural gas era’ and the existing empire of the Energy Division is destined to reduce its life as the gas reserves are depleting fast. So the energy sector bureaucracy and government establishments require their domain to expand, and coal may offer them that opportunity. Repeated failure and disasters of government owned Barapukuria coal mine project systematically demonstrating all the sorry states of its management and technical limitations. But the Energy sector ‘masters’ prefer not to take into cognizance these hard facts, because the huge wastes of public funds for such ‘white elephants’ cause no harm for them. Also the officials who are making the changes in the draft coal policy are far away from the technical realities and of the coal and mining industry. 

The restrictive changes and promotion of government sector above all invited the major contradiction with the objectives and target of the Coal Policy. It is clearly stated there, that within 2011 the remaining natural gas reserve may meet the countries demand and there is no alternative but developing coalmines and using coal for power generation and for other energy needs in the country. There is a specific target set in the Coal Policy draft that within next 10 years the country should be able to produce 20 million tons of coal per year to meet the growing energy demands. Government needs to come out of its dependence on the present subsidy based practically sole energy source e.g. natural gas. Government lacks capacity to fund for coal exploration and mining as well as the country has acute shortages of technology and trained manpower for coal sector development. Therefore, foreign investment and technology is inevitable for coal sector development. 

The government policymakers are repeatedly saying that FDI is more beneficial for the country than loan and aid form foreign sources. And investment becomes real when business is assessed as business. Unless mutual benefit and respects are ensured, there will be no boniness within the parties. Unfortunately the Wahidunnabi committee has been trying hard to ‘invent the wheel’ and making corrections in the draft Coal Policy to convert it to a demonstratively failed command economy oriented policy. The sector specialists say it is destined to fail in attaining its targets and objectives. Then the simple question surfaces, why this endless drama for framing a useless Coal Policy and wasting valuable times for real actions towards advancing the coal sector development?

Possibly the answer is as simple as the Energy Secretary loves to repeat, ‘no coal sector project decision unless there is the Coal Policy’