Highly placed sources said the government is unconfident about this matter and is most likely to resort to a time killing strategy for the next two months and leave the entire matter to the next governments.

Asia Energy officials in Dhaka yesterday evening said they have not received any communiqué from the government about cancellation of the deal.

An arbitrary cancellation will first imply that foreign investors cannot rely on Bangladesh's sovereign guarantee. This will greatly affect the country's image internationally.

Secondly, this will lead to an international arbitration and that might cost Bangladesh double the money Asia Energy has invested in the country so far. If Bangladesh loses such a case, the penalty could exceed Tk 200 crore.

On the other hand, with the election nearing, the government will not be able to send back Asia Energy to Phulbari even with the highest security. In the wake of last week's killings, public sentiment is intensely against the company that had proposed relocation of at least 50,000 people from the mine site.

Leaders of the ruling BNP themselves are now divided over this matter. Party leaders having leftist political background are now opposing the Asia Energy deal but other leaders do not subscribe to the idea of cancellation of a deal that has sovereign guarantee. The latter group however has remained almost silent.

Sources said energy ministry adviser Mahmudur Rahman was frantically trying from yesterday morning to convince the country's business leaders to issue a statement in favour of the Asia Energy deal. But none of them agreed to do so till evening.

Side by side, the high commissioners of UK and Australia yesterday visited the Prime Minister's Office (PMO) to express their concern over the fate of the deal.

Cancellation of the contract was announced by Rajshahi Mayor Mizanur Rahman Minu Wednesday at Phulbari to pacify people agitating against the open-pit coal-mine project. The BDR shot dead six demonstrators on August 26, fuelling the anti- Asia Energy agitation to an uncontrollable level.

Who is at fault?

The Phulbari issue stemmed from the government's total indifference to public outcry against Asia Energy's proposal since last year. The company on the other hand failed to fathom public sentiment against its open-pit mining proposal.

"The government left to Asia Energy the issue of negotiating with the public for resettlement. This is so ridiculous. Why would anyone in Phulbari trust a foreign private company? The government should have taken it up from the beginning. This is a failure of governance," noted an official.

"Moreover, when people started voicing that they do not want to be relocated and that this project will jeopardise their livelihood, the government could have simply asked Asia Energy to revise their proposal by dropping the open-pit mining aspect. If the company would have refused to do it, the government could consider not giving it mining licence," he added.

A top business leader pointed out that open-pit mining is typically implemented in countries with low population density. He went on, "There is a huge social aspect of such a coal mining project. It is not just economics. Why did the government wait so long allowing the National Committee to Protect Oil, Gas, Mineral Resources, Electricity and Port to stage a massive demonstration? And then why did it kill people?

Seeking anonymity he said, "It is not the fault of Asia Energy that it has such a deal. Our government signed it, and it must take the onus of all the disasters that happened at Phulbari."

A geological expert expressed similar views, saying it had always been up to the government to change, modify or not to approve Asia Energy's proposal. "The company has so far done exercises relating only to exploration, feasibility and environment. If the government has okayed these even if these were not up to the standard, it is again the fault of the government," he said.

"But following the Phulbari killings, Asia Energy executives made some audacious remarks about the protestors. This has irritated everybody."

The expert pointed out that Asia Energy's field level staffs did a bad job with public relations at Phulbari. Those who were assigned to negotiate with locals about relocation had practically talked against the company to the locals or gave cash to the disgruntled ones, and gave positive reports to the company. This created the image of a corrupt company among Phulbari people.

"The truth is Asia Energy is a novice company with zero project experience. People started questioning why did the government sign a deal with such a company. The disastrous instances of Niko Resources at Tengratila or Occidental at Magurchhara have also fuelled public suspicion about the company," he observed.

Deal cancellation issue

Cancellation of the contract that allowed Asia Energy to explore and conduct survey and prepare project feasibility study must follow some steps permissible in the deal, says former chief of the Bureau of Mineral Development (BMD) M Muminullah, who was involved in the original deal.

The government signed this contract with Australian coal company BHP in August 1994 on the basis of an unsolicited negotiation, which was transferred to Asia Energy in 1998 as per the country's Mines and Minerals Rules, 1968.

The contract can be cancelled if Asia Energy violates different aspects of mining. But before the cancellation, the company has to be warned. If the warning is ignored, the company will be penalised. And further violation can lead to termination of the contract, Muminullah said.

"In 1998, when the government okayed the transfer of BHP contract to Asia Energy in the shape of Assignment Agreement of Exploration Licences under the Mines and Minerals Rules, 1968, the government had formed a 12-member inter-ministerial national advisory committee to look into the deal. This committee was also supposed to monitor the activities of Asia Energy. But it did not continue," he said.

Following the 1998 transfer, Asia Energy's activities in Bangladesh were slow and focussed on survey and occasional drilling of holes to collect coal samples. It started its activities in full swing in 2002 after having an understanding with the government on open-pit mining.