Another coal zone leased out to Hosaf

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In early 2003, the alliance government in keeping with its tilt for striking unsolicited deals in energy sector secretly leased out Khalashpir coal zone in Rangpur to Hosaf group, the company that played a vital role in plundering Barapukuria coal mine and power projects.

The way the deal was made is much more opaque than that with Asia Energy. There was no involvement of government experts in awarding the lease to Hosaf and no explicit justification for selecting such an inexperienced company with dubious records in coal sector.

The Geological Survey of Bangladesh (GSB) in 1962 discovered the coal zone and in 1988 re-discovered it, expanding over a 25 sq km area with an estimated reserve of 685 million tonnes of coal. The coal is worth tens of billions of dollars.

According to sources, the Hosaf contract was made by copying the terms and conditions of the deal with Asia Energy (originally with BHP). But in case of Asia Energy, there were negotiations at expert level, which was not done in this deal.

The Bureau of Mineral Development (BMD) awarded the contact. Placed under the energy ministry, the bureau is run by a single official.

Previously, the then BNP government in 1994 leased out Phulbari coal zone to mining giant BHP, which later landed with Asia Energy. Though that process involved bidding and negotiations, it recently drew public criticism as being anti-people. The BNP government had also struck a Suppliers Credit deal with China for Barapukuria, in which Hosaf took the lead as the local agent. This deal has enormously drained out national resources through corruption and failed to deliver the mine or the power project as per the contract.

The Hosaf deal was made when energy prices globally rose and price of coal exceeded $50 per tonne from $25 of the nineties. “Khalashpir coal belongs to the nation and it is worth billions of dollars. The nation deserves a fair deal,” noted a source.

Earlier this year, Hosaf group along with Xinwen Mining Group of China concluded a geological survey in Khalashpir zone. The survey began in January 2005.

Drilling just three test holes in the region and conducting seismic survey, they came to the conclusion that the zone has a recoverable reserve of 143 million tonnes of high quality bituminous coal in eight underground layers in 2.5 sq km area of Pirganj upazila of Khalashpir.

In contrast, Asia Energy had drilled 108 holes before coming to the conclusion that Phulbari zone has 572 million tonnes of recoverable coal.

Hosaf hopes to start extracting coal from Khalashpir in 2008.

Though Hosaf’s involvement in Barapukuria mine could not help completion of that mine in 10 years, the company in less than two years not only completed a reserve study but also submitted a feasibility report to the government on August 1.

Hosaf Chief Moazzem Hossain told the press that the feasibility study outlined a $300 million joint investment with China for developing the coal mine and setting up a 220 MW power plant.

This shows a sharp contrast with the investments made in Barapukuria coal mine and power projects, in which Hosaf is involved from the beginning.

Barapukuria coal mine alone is charging the government $250 million and the 250 MW power project at the mine site is charging another $260 million. The total cost here is $510 million.

Hosaf says it had brought the Chinese Supplier’s Credit deal with Bangladesh. But according to the World Bank and economists, about 40 percent of any Supplier’s Credit goes to pockets of unscrupulous people involved in such projects.

Barapukuria mine constructions began in 1995 and it was handed over to Barapukuria Coal Mine Company Ltd (BCMCL) of Petrobangla last year in unfinished condition. The mine’s production capacity has halved because of flawed project design while the power plant keeps on tripping due to technical glitches. In addition, the power plant is consuming an unbelievable 1,100 tonnes of underground water for power production causing a massive environmental hazard.

Experts criticised the way Hosaf was chosen and given the deal.

“This is not how the government should lease out national resources worth billions of dollars to individuals or a private company. The Bureau of Mineral Development is not at all equipped to sign such a deal,” says a geologist experienced in coal mining and exploration.

“The BMD should be merged with the GSB which has about 600 people, including top level experts. Years ago, the government was given specific proposal for such merger. But the government ignored it because it is easy to control or influence one or two officials than influencing a group of experts to help it take a bad decision,” he noted.

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