Bangladesh News

After turning Barapukuria coal mine project into a liability for the nation by doubling its cost and halving its production capacity, the project’s Chinese developer CMC and its local agent Hosaf Group have jointly proposed taking over the mine, highly placed sources said.

The CMC and Hosaf Group in their two-page proposal made earlier this month wanted to take over the mine on the basis of unsolicited negotiation. In the early nineties, Hosaf Group helped the CMC get the mining project contract through unsolicited negotiation under a Chinese Supplier’s Credit undermining the national interest.

Sources said that in the last one decade, the CMC and Hosaf drained out hundreds of crores of taka without delivering the mine as per the original agreement. Any Petrobangla officials and staffs involved in this massive project but opposing the misdeeds have been generously bribed to make sure that neither the CMC nor Hosaf is penalised in any way for their failures and irregularities.

And now the Hosaf-CMC consortium seeks a joint venture with Petrobangla that owns Barapukuria Coal Mine Company Ltd (BCMCL) and offers Petrobangla 30 percent equity, keeping 70 percent of the coal production to itself. The Hosaf chief is the brother of a ruling BNP lawmaker.

When the mining project started in 1994, price of coal was less than $25 dollars a tonne. Now, the global coal price has skyrocketed to $75 per tonne.

In response of the Hosaf-CMC proposal, Petrobangla instantly formed a committee headed by its director of mines and mineral.

This proposal came as a result of Petrobangla’s delay in repayment of fifth instalment of the Chinese Supplier’s Credit that was imposed on it by the previous BNP government.

Petrobangla has paid the Chinese company Tk 600 crore in four instalments since 1995. And now it has to pay the fifth instalment of Tk 62 crore.

“When Petrobangla paid the fourth instalment a couple of years ago, it had to face a lot of hardship as the government takes away almost all of its Tk 2,500 crore plus revenue. Petrobangla borrowed money from the government to make those payments,” said one source.

This time the energy ministry has said it will not arrange any loan for Petrobangla for the repayment. Instead, the BCMCL will have to make the repayment from its own earning.

But the BCMCL is unable to earn enough despite very high price of coal as the coal-fired power plant, which is the main buyer of coal, is not buying much and nor paying the arrears.

Under the influence of Hosaf, which is also the local representative of a consortium of three Chinese companies, the government is paying $260 million for the power plant that could be built for less than $170 million.

Moreover, the Chinese consortium has built a power plant with hundreds of flaws, including that the machinery is not suitable for the type of coal produced in the mine. Barapukuria coal is rich with iron, and also damp, and the plant cannot efficiently handle burning this type of coal, plant sources said.

The power plant was supposed to start operation early this year but till date it could not properly start full operation as it has been tripping frequently.

The plant is designed to consume 85 percent of Barapukuria coal. But due to its faulty functioning, a huge quantity of coal has been piled up at the mine site.

“The mining authorities now has an inventory of 1.20 lakh tonnes of coal on the surface and has stopped further production of coal,” said one source.

The Power Development Board (PDB) that owns the coal-fired power plant owes the BCMCL Tk 64 crore for coal consumed by the power plant. In addition, the plant should pay another Tk 60 crore for the 1.20 lakh tonnes of coal in the inventory. If the PDB pays the BCMCL this amount, Petrobangla can repay the CMC the fifth instalment of the Supplier’s Credit.

As this is not happening, the CMC-Hosaf consortium told Petrobangla in their letter that since it is unable to pay the instalment, it should consider giving it the mining lease.

Petrobangla officials however rule out the unsolicited proposal. “The government is in deep trouble with this mine. But the mine has 303 million tonnes of coal in place with 200 million tonnes recoverable, if designed and handled properly. It has high financial value if everything is done anew, properly and protecting the national interest,” one official said.

“There should not be any question of any more of unsolicited deal,” he said. “Besides, whichever company takes over the mine should also pay for the project cost of Tk 1,600 crore first. The equity between the government and the mining authority should be designed in the light of the present international coal price.”

WHAT’S SO LUCRATIVE ABOUT THE MINE?
The Ecnec approved Barapukuria project proposal in March 1992 with the target of completing it on July 31, 2001. But the project was kept suspended when sub-soil waters started gushing in at a rate of 700 cubic metres on April 5, 1998 at a depth of 1,100 feet. This happened because of design flaws, according to official sources.

Redesigning of the project involved relocating the mine’s shaft half a kilometre to the south where coal seams lie at a greater depth. As a result, the mine’s annual production capacity has been officially reduced to 700,000 tonnes from the original target of 1.1 million tonnes. Unofficial sources however say the present mining design will give a maximum annual production of 500,000 tonnes.

Besides, the CMC did not provide mining equipment as per the agreement, yet the government accepted the mine in its half-baked condition.

Combined with the doubling of project cost and reduction of annual production capacity, cost of coal production has nearly doubled from $ 35 a tonne initially to nearly $60 now.

Meanwhile, the global price of coal, which was barely around $25 per tonne in the early nineties, has shot up to $70-75 now.

In 2004-06, the BCMCL produced 87,000 tonnes of coal and in 2005-06 it produced 2.39 lakh tonnes. The company sold a portion of the coal to private buyers at a rate of $73 a tonne through open tender. This shows the potential of the mine, which in the present situation can not be tapped.

The BCMCL sells coal to the power plant at the site for $60 per tonne.

This has made the coal mine a lucrative business.

Earlier last year, Indian giant Tata had proposed taking over the Barapukuria mine. And the government primarily said it is willing to permit this if Tata pays the existing project’s cost and also starts mining after 2011, when the existing operation contract with China will end. This is essentially an admission by the government that the current project has failed to attain its objective.

ENVIRONMENTAL DISASTER AT THE MINE SITE
Though many geologists had in the past favoured underground mining than open-cast mining, Barapukuria underground mine has brought along environmental catastrophe due to project design flaws, negligence of the developer and non-installation of many project components as per the agreement.

According to sources, a huge area on the surface of the mine has already subsided and become unusable. Besides, the mine is pumping out toxic black waters into the locality, causing health hazards.

But the authorities have not taken any action against the CMC for not installing environment friendly units or other facilities to prevent such disasters, or for faulty mine designs that are causing land subsidence. The project’s consultant is also responsible for such poor quality work as it did not object to the foul practices.

“It has been possible for the CMC, project consultant IMCL and the Chinese consortium to deliver low quality product because of Hosaf, which has orchestrated everything from the beginning,” said an official.