The draft being prepared by a committee headed by the ministry's additional secretary Wahidunnabi Chowdhury has also left a big question mark on the issue of the open pit method of mining--which is opposed by a section of experts and activists.

A top energy ministry official, however, said he was aware of the problems of the new draft. "We can not go for a prohibitive policy that discourages efficient investors and encourages low quality investment like that in Barapukuria. This draft is still undergoing changes and it will require approval of the ministry first," the official said.

Experts say Bangladesh's untapped coal potentials in north Bengal can meet the country's power demands for 60 to 90 years at the present rate of power consumption and drastically transform the economy. But to tap into even a quarter of the resource, billions of dollars of investment is needed.

Foreign investors and some experts say the draft has grossly digressed from the previous versions especially in the areas of royalty and coal export options. "Some ideas reflect extreme nationalism and reservations against private investment," quips an expert, "The basic idea for having the policy has been wrongly translated."

The suggested royalty for coal development would practically shoot up to 30 percent, given the present coal price. This implies that coupled with taxes, a coal developer would have to pay around 50 percent of coal sales revenue to the government--which investors term "absurd" for carrying out any business.

Most stakeholders now agree that the existing royalty of six percent is too low in the present context of global energy price trend. The previous draft increased it to 16 percent, which was found acceptable by majority stakeholders. Asia Energy had however expressed its reservations.

Discouraging coal exports and awkwardly promoting coal-based power plants, the draft suggested that a mine developer would have to set up power plants at the mine site. Again, the developer would be allowed to export only that much of coal which is consumed by the power plant.

"The idea is to encourage setting up bigger power plant, so that developers can export bigger chunks. But there are two basic flaws in this idea. Firstly, the coal developers are not well-known for efficient power plant building--and therefore, even if a developer agrees to the idea, nobody guarantees a cost effective and efficient power plant. Mine development is entirely different from developing a plant. This is a basic hindrance to getting a good developer in our country," says a power sector expert.

"Secondly, this encourages inefficient power generation. If someone sets up an inefficient plant that consumes more coal to produce 100megawatt power than required by an advanced plant--he gets the benefit of higher export, though he's inefficient. At the same time, the efficient builder gets less coal to export," he adds.

The fifth draft accommodated export of coal in a different way. In the first 10 years of the policy implementation, the country may export double the coal it consumes. From then on, the export-local consumption ratio would be 1:1.

Sources said the coal policy committee has accommodated these ideas under tremendous pressure from a group of people who oppose Asia Energy's Phulbari deal.

"Following the Phulbari incident, talking in favour of open pit mining or coal exports has almost become a taboo for officials and experts. But such restrictive thoughts are not practical if you really want to do some good things with coal," said an official.

"The fact is open pit or underground mining are both hazardous for the environment to some degree. We have to measure the best method on the basis of returns that could compensate the damage plus give us more," he said.

A top official of the ministry noted, "Whether a mine should be open cut or underground, it should be determined by the unique geological feature of the coal zone. If coal deposit is located 100 meters underground, you cannot do underground mining--because the land will cave in. If the deposit is below 400 meters, you cannot go for open pit--because it would be an enormous cavity. We have seen in Australia that two mines are located side by side and use different methods because of their geological features."

A senior teacher of Buet however recommended to the committee that there should be a 10-year ban on open cut mining. During this phase, he suggested, the government may take an initiative to run an open-pit pilot mining project to determine environmental hazards. The committee, however, rejected the idea, but this influenced it to move out from the previous draft that accommodated the idea of open pit mining.

The draft proposes a new formula to calculate royalty rate. The floor royalty rate would be 10 percent, assuming the basic price of coal at $25 per ton. Then it adds 1 percent additional royalty over each 2.5dollar hike above 25 dollars. Presently the per ton price of coal is above 60 dollars, and the Power Development Board (PDB) is importing Indian coal for 70 to 80 dollars per ton to run the Barapukuria power plant. This implies a royalty of 24 percent to 32 percent.

"We do not know what is the basis for such a calculation. But this is not going to work for even a government run company like the Barapukuria Coal Mine Company," notes an official.

A top official of the ministry says, "Bangladesh has coal, but we need huge capital and heavy equipment to make the best use of the resources. That's why we need an investment friendly policy."

Some features of the draft which apparently discourage investors include: Section 2 that says the government sector will get priority, while joint ventures between public and private companies will be encouraged.

Section 2.2 asks private investors to off-load minimum 20 percent of shares from the starting date of coal production.

Section 3.2 says voids will not be allowed in mined area.

Section 7.1 says the lessee is to complete the land reclamation works at the same time with mining. Hundred percent of mined land has to be reclaimed and there will be no depression of mound.

Section 7.4.1 says the lessee is to pay three times in damages for land in the mine area.

Section 8.4 says the highest and best bidder for payment of royalty and the company who agrees with the coal policy will be selected, while the company that discovered the coal will get preference provided its bid document is considered as highest and best bid document.

Section 9.2 says the investor should start commercial operation of coal-fired power plant within one year from the beginning of coal production. But the company who is able to commercially operate mandatory power plant from the date of coal production will get preference for obtaining mining lease.

Section 9.2 says Bangladesh Energy Regulatory Commission will fix power tariff in taka. Price of coal for power project and private power will be determined in taka.

Section 10.6 says licensee will be given tax and duty exemption during exploration. During development and mine operation, the lessee will have to follow the Industrial Policy.

Besides, the sections dealing with export, royalty and ratio are viewed as discouraging.

The process to frame the coal policy was initiated by the energy ministry with help from IIFC and Petrobangla from August 2005.