Coal: Where We Stand ?

Dr. SM Mahfuzur Rahman

The Information Gap & an Unwanted Bottleneck
One of the major limitations of researchers and decision makers in Bangladesh is the difficulty in having complete information related to the issue, which they intend to study or on which they are to take decisions. The case of coal mine in Phulbari is not an exception. Not many among the people, who are now involved in the debate on the mine actually have full information about the

a. Economy of Phulbari and the surrounding area,
b. Geophysical characteristics of the area,
c. Technical details of the possible mining methods that can be applied in Phulbari and their consequences, and
d. Mitigation measures for facing the adverse effects of adopting any particular method or a combination of methods.

Curiously enough, a section of the intelligentsia has taken a very open stand against mining coal in Phulbari apparently having only very scanty information on the above issues. This section of the people smartly ignores the whole agenda of energy crisis in the country. Instead, the leaders of the section are vehemently running the campaign that the mining in Phulbari coal field will cause disaster to the local community and environment and are not at all ready to consider that the various issues, including acquisition of land causing people to leave their ancestral abodes, temporary, or even permanent loss of agricultural land and difficulties in shifting infrastructures on the land acquired of mining the coal resources in Phulbari are to be looked at in a framework of overall analysis of

a. The resources of the Phulbari coal mine and their importance for the economy of the region and of the country;
b. All the different types of social and economic costs and benefits of mining at Phulbari and their magnitude;
c. The available mitigation measures for the possible adverse effects;
d. Anticipated gains for the nation by mining the coal and the losses by leaving it underground for an indefinite period;
e. Opportunities to be missed by postponing any initiative of coal mining in a situation when the country is facing severe energy crisis, the prices of energy resources are soaring high in the international market and the prospects of developing alternative energy sources in the country is very bleak; and
f. An outlook to the country’s coal resources when the regime of carbon trading in the world is changing very fast.

Unfortunately, much before being able to understand the importance of the mine, as well as of the problems and their possible solutions, a part of the Phulbari people had been instigated to organize movement against the mine and the key strategy used in motivating local people in the movement was the psychological play of the arguments that millions of local people will become permanently homeless, that the mine will eat up all the fertile agricultural land of the area and that the mine will cause desertification of the whole region. Obviously, the campaign was based on exaggeration of the ‘threats’ of mining coal in Phulbari for the local people.

Regional Disparity & the Poor Economy of the Coal Rich Area
It is a popular belief in Bangladesh that the north-western part of the country is the victim of prolonged regional discrimination by policy makers which has made the region a relatively backward one. There are many economically backward territories in other parts of the country also, but such territories in other parts are mostly enclaves, while the backwardness in northern Bangladesh stretches widely throughout the region. An important observation in the case is the alleged indifference of the policy makers to the causes of underdevelopment of the northern region of the country and to the need for eliminating the disparity.

A few years ago, people in the northern region of the country started to believe that with completion of the Jamuna Bridge, the region would get a momentum in development. It was expected that the factor mobility created by the Bridge alone would change the economic geography. In fact, the Bridge has a significant contribution to taking the agro resources, including agricultural raw materials from the northern to the eastern part of the country and making development of the eastern part easier. But since the Bridge could only provide the transport facilities and the northern part continued to remain deprived of power or gas supply, there had been no expansion of manufacturing industries in the region and the Bridge could only contribute to a faster drainage of resources from this part of the country to the eastern part. The effect was the increase in prices of agricultural products in the northern region. The local producers at the grassroots level however, did not get the benefit, which was appropriated largely by the middlemen. Most rural markets in the northern region now face scarcity of fish, milk, eggs and seasonal fruits. Because of the easy access to local markets the brokers and wholesale buyers purchase these products at cheaper prices for selling in towns and cities and thus create shortage of them for local consumers. The later now buy products of their own origin at prices much higher than what the urban buyers sometimes pay.

Inadequate power supply is the single most important reason for economic backwardness of the northern region of the country. Bogra, once an emerging industry center of the country, had a few pioneering industry units, which were closed down largely because of the failure in competitions with similar industries in other parts of the country. Most important among the causes was the power factor. Industries in Bogra could have uninterrupted power supply only through a support by producing diesel fuelled electricity. The cost of production of such power is much higher than the gas fuelled power available in the eastern regions. This makes the difference in competitiveness of the Bogra products and ultimately, a cause to the ‘death’ of the Bogra industries.

The scenario is the same in any other part of the northern region of the country and the conclusion is obvious: it is not possible to eliminate disparity between the eastern and northern regions of the country without availability of sufficient electricity in the later region. Discovery of coal deposits in Phulbari, Barapukuria and Dighipara in the southern part of Dinajpur district and in Khalaspir of the adjacent Rangpur district has opened up a great opportunity for providing electricity to the region and also solving the country’s energy crisis in the face of quick depletion of the gas reserves and bleak prospects of developing other energy sources.

The six southern upazilas of Dinajpur district – Parbatipur, Phulbari, Birampur, Nawabganj, Ghoraghat, and Hakimpur – which surround the coal deposits in Barapukuria, Phulbari and Dighipara, cover a total area of 1400 sq. km. and have a total population of about 1 million. Agriculture is the main profession of the local people. Fifty per cent of the area’s total population has farming as the principal (for majority, the single) profession and about one-third of them are agricultural laborers. This means that three-fourths of the people of the area live on agriculture, which was the scenario for the whole country some four decades ago. Employment structure in other regions of the country had changed over time because of the structural changes in the economy. But the employment structure remained unchanged in Phulbari and its surrounding areas, which only indicates that the economy of the sub-region did not have much change over a long period of time. About 2.5% of the people in the area are non-farm laborers, about 11.5% are engaged in business, 5.5% have jobs in private and government offices and the rest are involved in miscellaneous professions. That only a small proportion of people work as non-farm laborers shows that the industry sector has an extremely marginal development in the area.

There is no reliable statistics about the number of the different types of industry units in the six upazilas and also, not much is known about their production capacities, the capital and manpower employed, the technology used, and their contribution to use of local resources and to the economic and social development of the local people, as well as of the people of the country as a whole. This does not mean that the area is rich in industries and it is just a point of non-availability of statistics. The literature is relatively blank on the issue because there is no considerable industrial development except that there are a few automatic rice mills, a number of paddy husking/wheat grinding mills and some bakeries, ice factories, and saw mills and a handful of welding workshops. The area was once rich in traditional workshops of craftsmen such as the goldsmiths, blacksmiths and potters all of which are now in the decay and at present, they have practically no importance as industry units. The area has a great potential for development of agro-based industries which remained unrealized largely because of the poor transport and communication infrastructure and non-availability/acute shortage in supply of power. Less than 10 per cent of the 2700 km road network across the six upazilas are metalled and although the maps show existence of a large number of rivers and their tributaries in the area, they lost navigability long ago and are of no use now as part of transport network.

The area however, is blessed with some modern industrial projects – a railway workshop at Parbatipur, the Barapukuria Coal Mine and a 250Mwt power plant at the Barapukuria mine gate and the Madhyapara Hardrock Mine. It is assumed that the selection of Parbatipur, a large railway junction in the northern part of the country, as the location for setting up the railway workshop was historical. The railway department possessed a huge amount of land at Parbatipur and although the railway workshop might have some contribution to repair and maintenance of the railway wagons and or engines, there is every doubt whether it actually has any effect on the local economy. It was easy for the government to establish the workshop at Parbatipur because there was no resistance from any group of social activists in acquiring such a huge amount of fertile land. Most local people have little knowledge about what the workshop actually does. A significant reason for it is the fact that the workshop has practically no or a very insignificant multiplier effect in the region and it does not create new employment opportunities or could trigger any momentum in the region’s economic development. Unfortunately, neither the media nor any section of the intellectual community and the social workers have ever raised the question whether it is at all justified for the workshop to acquire such vast amount of the fertile agricultural land. But it can be guessed that perhaps the workshop could not be established in some other location of the country in the face of the resistance of the local people of those other places against acquiring the fertile and scarce lands for the purpose.

Coal for Power to the Country & Development of the North-Western Region
Discovery of coal deposits in Barapukuria, Phulbari, Dighipara and Khalaspir has opened up new prospects for development of the North-western region of the country. Coal search and exploration started in the area fairly long ago and a good number of intensive studies have been done on various aspects of mining the area’s coal deposits, including the technical, social, economic and environmental issues. Review of the findings of these studies leads to the conclusion that with fast depletion of the reserves of natural gas, the main fuel for producing electricity and the main raw material for production of fertilizer, there is now no alternative to mining coal of Phulbari, which can solve the country’s energy crisis and provide new engines of growth. Some other major conclusions are:

a. Discovery of coal reserves in the Phulbari area of northern Bangladesh is seen as a blessing in a situation when the country is facing the threat of an inadequate supply of affordable commercial energy including electrical energy.
b. The growth rate to be achieved by Bangladesh in the coming few years for achieving the Millennium Development Goals should be higher than the 5-6% that the country could achieve in the past two decades but the reality for the country is that even the modest target of a sustained 7% economic growth is not achievable without regular supply of electricity.
c. The present installed capacity of around 5500MW of the country’s power plants fuelled about 85% by gas, 3% by hydro, 4% by furnace oil, 4% by diesel and 4% by coal is not sufficient to meet the country’s energy demand, the generation is much lower than the installed capacity and at the existing rate of use of gas in power plants, production of fertilizer, vehicles, brickfields and some industrial units and in household consumption, the reserves of gas will be exhausted in some 15 years, when power production will collapse in the country.
d. Given the fact that the country is not in a position to significantly develop other sources of energy to meet its energy requirements in the near future it has become an obvious necessity for her to mine coal.

The expected benefits of a coal project in Bangladesh are

1. Use of coal as an alternative fuel for generation of electricity and improvement of the energy security and the economic infrastructure as the basis for growth and development of the economy of the country as a whole and the north-western region in particular;
2. Saving natural gas by use of coal in electricity generation and the use of the saved gas in increased production of fertilizer and other beneficial purposes including in industry units and households by expanding the gas supply network and thereby arresting the depletion of forest resources;
3. Supply of coal as a cooking fuel (for example, in the form of briquette) in rural households now dependent on traditional biomass that are becoming expensive and have alternative uses;
4. Working of the multiplier effect of the implementation of coal project(s) and especially, development of derivative industries and the working of export elasticity to economic growth; and
5. Revenues of the government over the lifetime of the project.

Issues Which People Love Talking About, Thinking, Considering
The costs and benefits of mining the coal in Phulbari would significantly vary depending upon the method of mining. Open pit mine would cause loss of agricultural land and displacement of the population and commercial and residential land and structures within the mine footprint area in phases over the years of mining in the area. This type of loss is inevitable in any development work and there are plenty of cases in Bangladesh which are more questionable in terms of the justification of the size of valuable agricultural land acquired or the number of people displaced in the name of development. This does not mean that the coalmine in Phulbari can be allowed to develop causing irreversible damage to people, land and the environment. An extensive investigation and work with local communities are required in identifying households and the land affected by the project, valuation of assets lost, estimation of the compensation and resettlement/rehabilitation requirements and determination of mode of comprehensive arrangements for all losses of assets, structures, lands and the crops, vegetation, fisheries, poultry etc. and training of people to cope with situations created by possible loss of livelihood/professions.

There is however, no reason to believe that coalmines cause permanent losses of all lands and structures. Designers of a coal mine should know how to phase out the mining work and develop a mining plan with provision for removal and storage of the top soil, excavation and mining the coal, backfilling and then restoring the topsoil. The forests and wetlands can be realigned and there are proven technologies of keeping the water table in and around the mining area at normal levels, and also of mitigating environmental degradation. Underground mining would involve costs of managing water inrushes inside the mine beneath the ground, inevitable risks associated with spontaneous combustion of coal with the emissions of hazardous and toxic gas and the high temperature, the risk of land subsidence in the mining area, the cost of holding the roof atop the long walls and the like and more significantly, the loss of major part of coal that would not be possible to extract in the underground mining method.

There is a debate around whether to use the entire coal of the mines in Phulbari or other areas in the domestic economy or a part would be allowed to export. A ‘nationalist’ claim may suggest that there should not be any export at all and the claim apparently looks very reasonable. But once the emotional element in the thinking is eliminated one may take a few points in consideration irrespective of whether the mines are operated as projects of a foreign, or a domestic (government or private) company or of a partnership venture having both government and private (including foreign) ownership. The points are:

(a) What should be the economic size of the projects (i.e., how much should be the annual extraction of coal from a coal mine to match the scale of investment in a project and make the project economically viable);
(b) How much of the coal the country is prepared to absorb within the economy (i.e., the requirement of the new coal based power plants and the plants for production of coal briquettes, use of coal in brickfields and in domestic cooking and the like).
(c) What to do with some grades of coal (for example, the high grade semi-soft coking coal) available in Bangladesh that would possibly have no use within the country in the near future.

The equation is: a coal project may need to produce, say, 15 million tons per year to be an economically viable one (at the given trends in the domestic and international market price of coal and co-products) but the country is ready to absorb say, only 9 million tons per year. Some economists may reasonably consider it wise for the government to allow export of the ‘surplus’ coal (and use the income from the export for settling import bills for machineries and supplies required for operation of the mine and associated infrastructure, as well as for economic development through reduction in pressure on the foreign currency reserves and establishing better commands on balance of payments) instead of asking the project to stockpile it. But the government might possibly gain more by not allowing coal exports. In that case, the government is to create additional coal use capacities in the country (say for example, by establishing new coal fuelled power plants, briquette factories, supplies of coal to brick fields, industries that use coal as fuel and not diesel or petroleum).
This paper assumes that by not implementing the project, the country would face severe energy crisis within less than a decade. It also assumes on the basis of the experience of the Barapaukuria coal mine, which is now in operation around the coal deposits in Phulbari, that although underground mining might apparently look more acceptable in terms of lesser displacement of people and structures or of losses of agricultural land and crops, the method is highly inefficient in terms of resource recovery. Some major problems of underground mining have already been raised above. In addition, the shallow depth of coal deposits at Phulbari, loose soil structure of the surface and sub-surface crust and the thickness of the coal seams do not suggest that the underground mining would be safe and cost-effective. In addition, the extraction of coal by using underground mining would create voids that will inevitably cause land subsidence. There are in fact cases of subsidence in Barapukuria underground coal mine and many among those who are proponents of underground mining in Phulbari now say that if the underground mining method is applied in the project, the land on the surface cannot hold the weight of buildings or relatively heavy structures.

Reduction in coal recovery rates or increase in the costs of mining for measures against the risks would make the project economically non-viable not only for the implementing agency, be it a government, a private, or a joint venture company. A question to consider is: if underground mining ultimately leads to subsidence and subsequently, the loss of the habitat and agricultural land, why shouldn’t the policy makers think of considering open pit method for the project from the very beginning?

The logical point in that context is to make thorough estimates for the losses in settlements and the environmental effects of open pit method of mining in Phulbari and create provisions for compensation and rehabilitation and the protection of environment. Three major concerns are: resettlement, water and the project area economy. The project affected people (PAP) are to be appropriately compensated for the losses they would incur and resettled somewhere and they are to take up land that can be used for production or to have the opportunity of being engaged in gainful alternative livelihoods. Unused land under the possession of Parbatipur Railway Workshop can be an ideal location for the resettlement.

Mining coal in Phulbari would have a substantial impact on the ground water regime and the availability of water for irrigation, fishing and household purposes. There is already proven technology of water management in and around open cut mines in different soil and aquifer conditions in various parts of the world and therefore, it should not be a problem for a coal project in Phulbari to maintain the desirable ground water level and keep the water free of hazardous elements, provided that the investors in such project allocates sufficient attention and resources for the purpose.

The mining would introduce the prospect for three aspects of development that are vital for more rapid development of northern Bangladesh:

(a) Development of agriculture;
(b) Development of industry; and
(c) Development of trade and commerce.

The mining would significantly improve ongoing production in both agriculture (largely because of expanded irrigation support, extension and contract buyers, introduction of new crops and cultivation methods as well as more agro-business to supply inputs, and training of local farmers, if arranged as a part of rehabilitation program for the project affected people) and manufacturing and services sector (directly, by using sustained supply of electricity and indirectly, because of development of derivative industries as the multiplier effect of development of mining activities in the area). There is considerable room for increases in production from a more commercial agriculture using greater inputs and consequently producing higher incomes.

Sitting in the Middle of Nowhere?
There are broader implications of having a coal mine project in Phulbari for development of the country as a whole. The key point here is the manufacturing implications of serving the mine and the urban expansion that will occur as a consequence of the investment. Such project will create impetus to development of trade and commerce in Phulbari and the whole of northern region, as well as in other parts of the country. However, development of the coal mine only is not sufficient for the purpose. Neither will it automatically call for a fast growth of business. What is needed in addition is the improvement in roads, railway and port system, and among many others, improvement in the financial transactions.

The Barapukuria Coal Mine is feeding coal to the 250 MW power plant at the mine gate. How much of the power generated by this plant goes to the national grid is not known but it could be gathered that the office of the Rural Electrification Board in Phulbari is keen to maintain uninterrupted power supply to the fast growing number of deep tube-wells in the area that pay solid revenue to the company and thanks to such business interest of the company, people in the area enjoy regular power supply, at least during the irrigation season. Many however, have strong doubts about the regularity of this supply once the season would be over.

Discovery of coal deposits in the north-western region of the country has attracted a great interest of the nation in the region. But despite the general understanding that the country is facing severe energy crisis and that there are strong potentials of these coal mines in solving the crisis, policy makers continue to hold a strategy of ‘critically reviewing all the different opposing views’ and ‘going slow in taking decisions’. Sometimes, arguments are put in a way that says that the strategy of going slow is justified because there had been public protests against implementation of any mining project in Phulbari and the protest even turned into violence leading to killings. The question is: why can’t the government investigate into the incidence while it has already earned a reputation of investigating into hundreds of different cases. The investigation would not only reveal the motives of the movement and the reason for killing but also pave the way for better understanding of the local community about the various aspects of the Phulbari coal mine, for their informed and meaningful participation in taking decision about mining coal in the area.

The government could investigate into how the so called ‘popular movement’ was organized and whether the motives of its organizers were at all very clean. Such an investigation is necessary for quick ending of the so-called ‘controversy’ over mining coal in Phulbari. Keeping the issue unresolved would only mean that the local people will continue to remain divided in opinions, which only goes in favor of those who want that the country should not develop its own coal mines and are not interested to respond to the question: what the nation would do in just a few years’ time when it will find that there is no electricity around. People now opposing the idea of mining coal in Phulbari may not be available for being held accountable in the critical situation when not only all factories in the county would stop, but also even the fans over the heads would not turn or the bulbs in the rooms or streets would not give lights. Given the present energy situation in Bangladesh and the forecasts for the future, there is no scope of wasting too much time on decision on the country’s coal.

The ‘go slow strategy’ for coal mining decision in north-western Bangladesh helps none but those self proclaimed ‘patriots’ who wish no coal mine in the name of protecting everything in the country. It may be safe for the government to sit and do nothing while ‘watching’ public opinion but possibly, it is not at all safe for the nation to wait for the candles to replace the bulbs or the hatpakha to replace fans and no power for the industry units, especially when oil prices in the world already exceeded $125 per barrel and diesel is no more any good fuel for electricity.

Dr. SM Mahfuzur Rahman: Professor, Department of International Business, University of Dhaka

Source: Energy & POwer
Date: 16 June,2008
Link: http://www.ep-bd.com/