Bangladesh News

Two years ago the Barapukuria coalmine project appeared to be a white elephant for the government. The corruption-inflicted mining project was producing coal at a cost of $91 a tonne instead of $35 as was projected in the early nineties.

The mining company was incurring a loss of Tk 50 crore on average every year while shouldering an enormous loan liability.

The same Barapukuria Coal Mine Company Ltd (BCMCL) is now cautiously expecting to strike its first operating profit by the end of the current fiscal year.

Due to low and inefficient production of coal in 2005-06, the mine incurred a loss of Tk 53 crore. In 2006-07, the mine’s loss increased to Tk 75 crore.

As the mine was revitalised from January 2007, its losses reduced to Tk 29 crore.

If the current coal production rate continues, it would produce 9 lakh tonnes of coal during the current fiscal, highest in the mine’s history.

“The company may hit an operational profit this fiscal year,” says a competent Petrobangla source.

This is a reality because the mine is performing well as the government in the last two years paid serious attention to it, the company’s management performed professionally, mine’s environment was less hazardous and price of coal shot up significantly.

Moreover, coal production has become non-stop as the mine now has two sets of mining equipment. A few months ago, the miners recovered one set of mining equipment worth $10 million that remained sealed off in a section of the mine since 2005 due to deadly gas emission.

The coal production cost now has come down to $65 a tonne [actual cost will be available on completion of the fiscal year] against a government-to-government sales rate of $71 a tonne and private consumers at $110 a tonne.

As it performed well throughout the calendar year of 2008, the mine’s inventory now has over two lakh tones of coal, completely filling its capacity.

In addition, another 30,000 tonnes of coal rests in the inventory of the nearby 250-megawatt coal-fired power plant of the Power Development Board (PDB).

It is a sharp contrast to the fact that in late 2006, when the Chinese operator of the mine — a consortium led by CMC — suspended coal production demanding payment of arrears, the coal-fired power plant had to cut power generation due to lack of coal supply.

The mine’s inventory ran dry in early 2007 when the deadlock with the Chinese CMC-led consortium was resolved.

“We are producing 4,000 tonnes of coal on an average. The power plant is taking 1,600 to 1,800 tonnes, leaving more than 2,000 tonnes to our inventory,” said a high official.

The power plant was supposed to consume 80 percent of the coal production.

As the mine’s inventory kept on piling up, the company sold 17,000 tonnes of coal to the private sector at a rate of $105 in July. But this sale was not enough to lighten up the inventory. “For safety reasons, we cannot leave coal unused for long; it has a tendency to burn on its own,” said the official.

In September, in a tender participated mainly by brick kiln owners fetched a price offer of $117.5 a tonne.

The BCMCL could only sell 15,000 tonnes in three weeks. This prompted the company board to lower the price to $111.5 a tonne. As this rate seemed attractive to the private buyers, the BCMCL is now selling 1,000 tonnes to 1,500 tonnes of coal a day. “By now we have sold 22,000 tonnes,” he added.

Bangladesh private sector consumes 3 million tones of coal a year, almost all of it comes from India that sells low quality and environmentally hazardous coal.

Though there is government restriction on such coal, the government allows importers to import limited amount of coal officially. The rest is smuggled into Bangladesh.

Though the Barapukuria mine produces high-quality coal, it must compete with the price of the lower quality Indian coal to win private buyers. “Luckily the global energy price had been favourable for our coal. The price of Indian coal shot up making our coal very competitive,” said the official.

The BCMCL expects to sell out 2 lakh tonnes of coal during the lean season of early next year which is known as the time when the brick kilns produce the bulk quantum of bricks in the year.

However, after April the brick production period will end and the mine will again face the problem of surplus coal.

The underground mine is currently producing coal from an area called Face 1104 that had three lakh tonnes of coal. This production will end in the third week of January.

Meanwhile, the miners are already installing mining equipment in a new Face number 1114 that has three lakh tonnes of coal. Mining will begin here in the fourth week of January. The mine is even preparing the next Face number 1105 that will go into production in mid-2009.

With a three months break included, between January 14 and December 31 of this year, the mine will produce a total of 8.25 lakh tonnes of coal. Last year, it produced 6 lakh tonnes.

Since the mine was commercially launched in 2005, it has produced around 2 million tonnes of coal.

“If the current production rate continues, we expect to hit 0.9 million tonnes of coal in the 2008-09 fiscal year. A large chunk of it will be consumed by the 250mw power plant and if the remaining coal is sold to the private consumers, the company is likely to achieve its operating profit,” said an official of the mine.

The mine was built under a Chinese supplier’s credit worth $131 million. Of this, the company has paid back eight instalments and is set to pay the ninth instalment within this week. The state-owned mine still owes China $58 million in this connection which will be paid in eight more instalments by 2012.

Of the eight instalments, the government through Annual Development Programme (ADP) paid $20.7 million and the company by taking loans paid another $52.7 million.

The mine’s annual recurring cost for production of at least eight lakh tonnes of coal is Tk 331 crore. This cost includes loan repayment, debt service liability, payment of 5 percent royalty to the government for coal production, operation fee for the Chinese consortium and payment of utilities, etc.