Thursday, August 21, 2008

Cloak and dagger over coal policy

Tanim Ahmed, NewAge, August 21, 2008

It appears that the draft coal policy began with a text heavily biased towards private investment and facilitating large margins of profit for the mining companies. Ideally, there should not be a problem with the private investor making large margins but not at the cost of national interests or doing away with all kinds of binding safeguards to protect the environment and livelihoods of thousands of people who would be displaced.

TWO years ago on August 26, a citizens’ platform led the locals to take to the streets protesting against a proposed open pit coalmine by a British mining company. The National Committee for the Protection of Oil, Gas, Mineral Resources, Power and Ports, led a procession of some 70,000 people from around the Phulbari township protesting against Asia Energy’s project that would see most of them become landless. Law enforcement agencies opened fire on the reasonably peaceful assembly just as it was about to break at the end of the day’s programme. Three people were killed, dozens were injured either by gunshot or when the law enforcers charged batons. What followed has become one of the celebrated instances of popular resistance leading to an agreement between the people of Phulbari and the government of the day. Like most other popular movements, the events of Phulbari Day was actually a culmination of almost a year’s campaign and mass awareness programmes undertaken by the citizens’ platform, popularly known as the Oil Gas Committee.

The local inhabitants found that this mining company gave out contradictory and sometimes erroneous information. They had little idea that the coalmine would gobble up their lands and that they would have to be relocated and begin life afresh. Although Asia Energy claimed to have conducted consultations with a few thousand households, only a few people admitted to having spoken to their representatives and refused to acknowledge those meetings as ‘consultations’ in which they had apparently agreed to the establishment of a coalmine in the area.

Misgivings still remain and a report published in the New Nation on August 20 does not do much allay them. Neither does a column by Mohammad Nurul Islam, a member of the coal policy drafting committee, published in Prothom Alo on August 4. Both the pieces relate to the finalised coal policy that has now been submitted for approval by the council of advisers. The report, citing sources in the Energy Division and those present at the meeting of the council in Chittagong last week, states that there were strong differences among the advisers over the amount of royalty and land acquisition issue. Apparently, it was the contention of some of the advisers that the recommended 13 per cent royalty was high and private quarters would not be interested to invest with such a high rate. Recommendations regarding the method of mining, rehabilitation of the dislocated inhabitants of the mine area and land acquisition also featured in the discussion. The policy was eventually sent back to the Energy Division with a recommendation from the council to shorten it and remove ambiguities, following which it might again be placed for approval in December.

In his column, Nurul Islam, a professor of the Institute of Appropriate Technology of the Bangladesh University of Engineering and Technology, states plainly that if the coal policy is approved by the council of advisers as it is, it would undermine national interests and favour the mining companies. He goes on to make several recommendations.

The initial proposal by Asia Energy, now Global Coal Management, in 2005, according to which Bangladesh would receive only six per cent royalty from extracted coal, was controversial and strongly criticised by different quarters. The misgivings would not appear unfounded given the context and process through which the Asia Energy project has come about.

Although the stipulated royalty for open pit coalmine was fixed at 20 per cent by the law prevailing till December 1995, the Bureau of Mineral Development entered into an agreement with BHP Billiton in August 1994 settling on a royalty rate of just six per cent for an open pit mine in Phulbari. Just one month before, the bureau had entered into another agreement with Petrobangla for Barapukuria at a royalty of 20 per cent. This was the first instance of irregularity betraying machinations in favour of a foreign investor.

The relevant law was modified in December 1995 stipulating six per cent royalty for open pit and five per cent for shaft mining of coal. When the BHP handed over their contract to Asia Energy, the government was not notified in due time.

The royalty rate remains an issue even today as both the report and Nurul Islam’s column points out. He recommends that this rate should be fixed at 15 per cent. But the council of advisers, according to the report, deemed 13 per cent to be too high. M Tamim, the special assistant to the chief adviser in charge of the energy ministry, however, pointed out that in other countries taxes are much higher than in Bangladesh and argued that the proposed rate was justified.

In its feasibility study, Asia Energy proposed that the open pit mine would to take up some 65 square kilometres although the prevailing law stipulated that it should not be more than eight square kilometres.

Once Asia Energy’s initial proposal came under fire from even the bureaucrats, particularly those heading the energy and mineral resources divisions of the energy ministry in 2005, there was a largely unanimous recommendation that it would be assessed under a coal policy that would be formulated. Since then, there has been little talk of a comprehensive energy policy or a mining policy encompassing all the different aspects.

The first draft was prepared and finalised on December 1, 2005 and a second draft by January 23 the following year. The two were made public and discussed. Both the drafts appeared as if they had been formulated in such a manner so as to accommodate the proposals of Asia Energy and the Indian Tata group, which was at that time vying for an open pit mine in Barapukuria as part of its $3 billion investment proposal in Bangladesh. The drafts allowed for substantial coal exports and projected such a level of extraction for which there would not be sufficient demand in the local market. The high rate of coal extraction was advocated in order to ‘ensure energy security’ for the country but would have eventually meant export of large amounts of coal.

The drafts were duly criticised but subsequent drafts still retained provisions facilitating exports and coal extraction in an open pit method of mining without concrete safeguards for adverse environmental impacts or rehabilitation of the local inhabitants that include a few thousand people of ethnic minority communities. The coal policy went through six drafts till June 2007 when a high-powered committee was formed with former BUET vice-chancellor Abdul Matin Patwary as chairman. The Patwary Committee, comprising eight members, was charged with analysing the sixth draft and finalising the coal policy.

Interestingly, this committee did not include Nurul Islam on some vague ground, but the members co-opted him into it nonetheless. The sixth version of the policy, dated June 21, 2007, was made available on the internet and public opinion was sought on it. This version remains the only one available in the public domain. Although it was put in the public domain claiming more openness, the subsequent versions were never made available. The seventh version that the Patwary Committee finalised also went through a relatively transparent and apparently participatory process with members of the media present at the meetings and different interested quarters welcome to make their submissions and deliberations. The seventh draft was submitted to the secretary for energy and mineral resources in January 2008. Since then the energy division has been working on the draft and, according to Nurul Islam, has changed the draft for the worse.

It appears that the draft coal policy began with a text heavily biased towards private investment and facilitating large margins of profit for the mining companies. Ideally, there should not be a problem with the private investor making large margins but not at the cost of national interests or doing away with all kinds of binding safeguards to protect the environment and livelihoods of thousands of people who would be displaced. But the process was such that with every draft the interest of the private quarters were diluted a little and provisions tweaked around a little to allow marginal benefits to Bangladesh. The Patwary Committee, therefore, had a huge task on its hand to turn the entire draft around and produce one that favoured national interests over anything else.

Given the controversy and criticisms, the committee members went out of their way to specify a number of provisions and even stipulated the constitution of the coal development committee. This appears to be the main complaint against them now, that they went beyond their mandate and produced something that is more like a policy and act put together. It should have been appreciated that the committee did extra work just to ensure all the bones of contention were covered. Now it seems, however, that the final draft will go through another round of modifications.
 It increasingly seems that just because the coal is there, it must be extracted and used. But there is yet to be a thorough cost-benefit analysis. There is yet to be any concrete plan that would duly quell the apprehensions of the local populace by proving that they would end up being better off if the coal mine is established and they are relocated. There is yet to be any analysis about the extent of water table draw down due to continuous flushing out of groundwater, which could have telling impact on an otherwise food surplus region.

There is also the consideration that this particular project happens to be related to mineral extraction and that too of fossil fuel. It is a matter of historical and anecdotal experience, as well as being the finding of an academic research by an internal evaluation of the World Bank titled ‘Striking a Better Balance’, that investment in fossil fuel extraction, be it oil, gas or coal, are typically predatory and add little to the overall development of the host economy. In fact, these investments create indirect hindrances to wholesome development and contribute to slower sustainable growth of the recipient or host economies.

Investments in the gas sector should suffice as learning experiences. None of the two companies have till today compensated for the blowouts that they were responsible for. There is no guarantee that Asia Energy will not follow in their footsteps. That Bangladesh immediately needs to develop its natural resources to meet future and current energy demands cannot be denied. But it cannot be at the cost of food security and livelihoods of thousands of people or irreversible environmental destruction that open pit mines have been proven to cause across the world. There is also the matter of population density that experts often point out. They say there has never been an open pit mine in such densely populated areas like Bangladesh where there are almost 1,100 people per sq km as opposed to three in Canada and Australia, 32 in United States or even 368 in India.

As far as Phulbari is concerned and as far as Asia Energy is concerned, the local populace will renew their pledge on August 26. Their message is a simple one. No to open pit. No to exports. No to foreign companies.