2.Coal fired power plants meet base load requirements of electricity systems: Coal plants cannot be ramped up and own much, which means it cannot follow electricity load. The capital costs are relatively high but the operation costs are very low. Coal plants produce the cheapest and most reliable electricity. They can run constantly at high capacity to meet the base load needs of electricity systems. The coal plants may loose some competitive edge in future when regulation may add carbon emissions costs.
Levelised Costs of Different Generation Technology at 10% discount.

3. Coal prices have relatively low and stable:
Since early 2007, the price of Coal caught up with that of oil and surpassed that of natural gas. But the recent surge probably reflects a temporary adjustment in the coal market as the supply infrastructure (mines, railroads, ports and ships) tries to keep up with rapidly rising demand and perhaps more importantly, the impact of some natural disasters (flooding in the mines of Australia in early 2008). Even then coal remains cheaper than oil and natural gas on a heat content basis, even when adjusted efficiency differences between coals fired and combine cycle gas –fired generation. Russian gas to Europe reached $11-12/MMBtu while Japan paid more for LNG since the price is linked to that of oil. In 2006 & 2007, Spain and South Korea paid $15-20 /MMBtu for LNG cargoes on spot basis.
Coal Scenario of South Asia
India is the major producer and user of coal. It ranks fourth with 10% of worlds total reserve after USA (27%), Russia (17%) and China (12%). Present prove reserve of Pakistan, Bangladesh, Afghanistan and Nepal are very negligible in the context of world’s reserve together representing only 1%. But the production also is negligible. India has mostly anthracite and bituminous coal, Pakistan has mostly lignite. Bangladesh mines small quantity of bituminous coal from the lone underground Barapukuria mine and use it for mine mouth power plant while lower quality coal is imported from India for brickfields and use in steel re-rolling mills. All coal-consuming countries in South Asia are net importers as the following table will evidence.
Coal in South Asia (thousand tons) 2005/06

In South Asia exploration activities are mostly done by state owned companies. Coal resources have not been appraised independently. The resources should be reassessed and reserve classification system at par with international practise must be done. Geological Survey of Bangladesh is working on establishing a detailed reserve classification approach, which may require international support. Such a resource assessment will also help identify the potential for Coal Bed Methane production.
Despite of present uncertainty about the reserves coal resources of Bangladesh, Pakistan and Afghanistan can be significant and could substantially add to power generation fuel mix if necessary investments are made in exploration and development. Low mine mouth cost of coal in the region (less than $10/ton in Sindh in Pakistan an $13-20/ton in India compared to about $25/ton in Indonesia) renders domestic coal very attractive compared to imported coal for power generation. Bangladeshi policy makers must note this. Indonesia has higher royalty compared to India and Pakistan that makes Indonesian coal more expensive even in their own country.
Domestic coal use for power generation in India costs $36 to $48/ton while imported coal can be as high as $ 160/ton including Cost, Insurance and Freight (CIF). Most coals now mine in the region has a calorific value of about 16MMBtus per ton while imported coal typically has 20-24 MMBtus per ton. Even after adjusting for heat content, imported steam coal is much more expensive than domestic coal.
Afghanistan, Bhutan and Nepal produce coal of higher heat content, similar to imports, but much lower in quantity than the total regional needs. Bangladesh is believed to have higher heat content and lower ash coal. Transportation from Bhutan, Nepal and Afghanistan to Pakistan and India due to transportation constraints may offset the price advantage.
Trade Infrastructure
Coal accounts for about 28% of the world’s primary energy needs. It is second to oil, which supplies over one third of the worlds energy needs. But coal trade is not in similar proportions. Natural Gas trading due to rising activity of LNG is trading higher than coal now. Coal trading is now about 16% compared to about 29% of natural gas and 60% of oil. These reflect the historical preference of producing countries using coal domestically and the smaller need for importing or exporting coal as many countries have some production. As bulk commodity, transportation of coal over long distance is relatively more costly. Railways, barges, ports and ships necessary to complete coal supply chain are capital intensive investments require long term certainty about market viability.
Global coal trade is projected to increase from 815Mt in 2006 to more than 1,150Mt in 2030. In South Asia strategic investments in rail and barge capacity within and across countries can encourage investment in coal exploration and development across the region. Traditionally, interstate trade in South Asia is limited to export of rather insignificant volumes of coal from India to Bangladesh. Nepal, Bhutan, Pakistan and India import coking coal via marine terminals from abroad primarily for metallurgical sector. India has decentralised export of coal, Nepal imports coal strictly through the Royal Government. India levied a hefty 26.33% export duty; Afghanistan has banned coal imports from Pakistan.
Coal Trade
Asian countries import about 55% of worlds steam coal .It may still climb to 61% in 2030.China which used to be self sufficient may soon become net importer mainly from Australia. Indian demand is projected to shoot double between 2005-2030. Australia and Indonesia would export most of the coal for China and India. Indonesia exports three quarters of its 129Mt production. Its unique location and existence of a large number of experienced competitive mine operators make the country a perfect source of coal for neighbouring Asian Countries. Bangladeshi think tank often brings Indonesia as reference when they talk about coal exploration and exploitation. Will Bangladesh ever attain the situation of Indonesia? Can Bangladesh be compared with it in any way? So any reference to Indonesia while discussing the coal mining issues is not only irrelevant and but also is intellectual dishonesty. But Bangladesh may learn lesson how Indonesia managed to attract major coal mining companies to invest in mining there.
Japan, Korea, Malaysia and the Philippines are long time customer of Indonesia and soon India will also be its major importer. So obviously export is a major incentive. As Indonesian export potential is expected to grow further companies of different countries are taking position in the country. Tata Power Company bought stakes in Indonesian companies, Aumin Kaltim Prima Coal for $1.3 billion in early 2007. On the other hand Tata proposed US$3 billion investment in power, steel, and Fertilizer and coal sector of Bangladesh hibernated for many years for Government indecision before being withdrawn. In not too distant future Bangladesh may need to import coal from Tata was allow to own Coal mine in Indonesia while Bangladesh found all possible excuses to frustrate Tata investment . Who knows whether Bangladesh deliberately kept gas exploration suspended over the last 5 years so that it does not prove enough gas facilitating commitment for Tata proposed industries?
Tata also proposed for open cut mining of Barapukuria mine and use the coal for power generation in their proposed power plant and steel mill in Bangladesh. Now Bangladesh is caught in its own trap. It does not have enough gas available in national grid to meet its own requirement. Proper utilization of coal still remains matter well into the future. In Bangla there is a proverb which means, “Stoping someone’s beginning cutting ones own nose”
Sri Lanka and Pakistan will also rely on coal from Indonesia.
Australia is also major player in the world coal trading. It exported 231 Mt in 2006.In 2006-07 India alone imported 21Mt coal from Australia. Many private companies operate mines and export from Australia.BHP billion has formed alliance with Arutmin in Indonesia to market Artumin’s production internationally, and owns operation in South Africa, South America and North America. BHP Billiton Energy Coal South Africa Ltd, one of the largest energy coal exporters in the world. BHP Billiton, Anglo Coal, Xstra and Rio Tinto are the four large companies which lea coal export operations from Australia and South Africa, two largest source of coal for South Asia other than Indonesia.
Coal and Environment
Environmental impact of coal mining operations has become a serious concern in South Asia. In Bangladesh, the development of Phulbari coal mine having an estimated coal reserve of 572Mt, using open –pit mining method is facing opposition from a section of civil society groups on the grounds of resettlement issues and negative environmental impacts. Artisan mines in the region lack proper maintenance, often operate unofficially without control of authorities, and damage the surrounding water and ecological resources.
On the other hand increased availability of high quality coal could have net positive environmental impacts if it replaces fuels that are more damaging to the environment. Brick manufacturers in the region use wood or used tires as fuel whenever coal is unavailable or prices are uneconomic, leading to deforestation and increased emissions. Brick kilns equipped with higher performance furnace s, scrubbers and good quality coal would not only prevent further deforestation but also reduce emissions. Brick kilns around the world have successfully transformed from burning wood, tires and other products with efficient technology to cleaner burning fuels and furnaces. Bangladesh has been pursuing a strategy of replacing other fuels with natural gas in kilns but limitation on pipeline networks, gas demand supply imbalance and requirement of gas for other users has hindered this effort. Bangladesh now imports inferior quality coal from India. There have been allegations of smuggling of substantial quantity of poor quality of coal also from across the border. This coal syndicate is extremely influential. Utilisation of this coal in uncontrolled way is also contributing to environmental degradation in Bangladesh.
Coal mine, brick kiln and similar energy intensive operations must be properly monitored The Government may mandated coal mine operators to submit environmental performance mitigation bonds that would be gradually paid back throughout the development of a project. Bhutan introduced such measure in 2002, Indian Bureau of Mines has recently developed liability bonds – a legal guarantee of a mine operator to comply with the approved mine closure plans. More efforts of similar kind should help improve environmental stewardship is well monitored. 
In addition, best environmental practices in pre –combustion, combustion and post-combustion periods can reduce environmental impacts significantly. Pre –combustion, coal may need to be cleaned of impurities, which will not only increase market value of coal but also improve its combustion efficiency and hence reduce emissions. This is called coal beneficiation, targeting sulphur and ash reduction. In addition to conventional method of physical and chemical cleaning, biological cleaning is now emerging. Organic sulphur is removed by chemical cleaning techniques such as molten – caustic leaching. Biological cleaning uses bacteria that “eat” the sulphur out of coal. Scientists are experimenting with fungi and are trying to duplicate the enzyme inside of the bacteria that eat the sulphur. If successful, these enzymes can speed the cleaning process when injected into coal directly. 
During and post –combustion, there are two basic approaches to using coal in a more environmentally friendly manner.

• To reduce emissions by either reducing the formation of pollutants such as nitrous oxides (NOx) or cleaning the flue gases or both;
• To increase the thermal efficiency of generation facilities (either by using a higher grade coal or technology & design improvements) so that les coal is used to generate the same amount of power.

In most countries in South Asia, electricity electricity generation is predominantly mono fuel based. Bhutan and Nepal depends almost exclusively on hydro, Afghanistan also have same situation, Hydro also plays major role in Sri Lanka and Pakistan. Sri Lanka depends on oil for about 60% of its need , depending on seasonal availability of Hydro capacity. Bangladesh depends about 90% of its need on natural gas. India uses coal for almost 50% of its generation. Natural gas also plays a very important role in Pakistan.
Electricity is already traded in the region on bilateral basis. Afghanistan imported more than a quarter of its consumption from Iran, Turkmenistan, Uzbekistan and Tajikistan. India provide grant assistance to Bhutan for building 1416MW of hydro facilities, out of which it imported 5.7Twh.There is also two way trade between India an Nepal, the later importing 266Gwh and exporting 101GWh.
The trade can be enhanced further with regional grid. In addition to Bhutan and Nepal, neighbouring countries such as Tajikistan and Kyrgyzstan have hydro potentials that surpass their domestic needs significantly. India, Pakistan and Bangladesh can develop further thermal capacity, mostly based on natural gas, if more investment in domestic resources takes place, an international gas pipelines and LNG import terminals are built connecting resources in the region as well as other parts of the world with consumers. Regionally produced and imported high quality coal can further diversify fuel portfolio in the region. The hydro-thermal mix at regional level would enhance system reliability (balancing seasonal fluctuations in water levels), increase electricity availability, reduce the need for oil imports and generate revenues for Hydro exporting countries, Bhutan and Nepal.

Role of Coal and Interregional Electricity Trade in Energy Security
Energy security in South Asia can be significantly enhance is domestic coal resources can be developed, coal imports can be increased and a regional power pool can facilitate electricity trade supported by a diverse generation portfolio of coal, hydro, natural gas and renewable. Coal will allow countries to diversify away from imported oil and natural gas, provide a power generation fuel, the price of which has historically been more stable. However, best environmental practices in coal mining, transportation and combustion should be adopted. A regional power pool, which can use cheap hydro resources and stable coal generation to meet the base load, would make power available to more consumers around South Asia in amore reliable way and at a lower cost.
The quarterly report of USAID most of which is included in this write up can be used as a guide for the policy makers to make comprehensive mid and long term plan for developing domestic resources in more economic and environment friendly way. Regional forum must more meaningfully work out power pool. Countries of the region must combine their technical expertise and skill to assist less fortunate countries to explore and exploit their resources, diversify fuel mix and finally countries must work together to set up power pool for energy security of the region.