09 Sep 2021

New Deal with Chinese Company Likely to Raise Coal Price for Barapukuria Power Plant

09 Sep 2021  by   

The price of coal from the Barapukuria Coal Mine Company Ltd (BCMCL) may rise again, this time by 5%, as the Ministry of Power, Energy and Mineral Resources has decided to renew a six-year contract with Chinese company XMC-CMC Consortium.

The price of coal per ton, including VAT and tax, has been proposed at US$85.85 in the new contract, officials said.

The XMC-CMC consortium is offering this price for the next 6 years, according to documents of the Energy Division.

The proposal is currently awaiting the final approval of the Cabinet Committee on Public Purchase.

Officials of BCMCL said they are currently buying coal from the contractor at US$81 per ton. With the inclusion of vat and tax, the price rises to $121 per ton.

They added that the price of coal would likely be increased by around $20 if the proposal is approved.

“Currently, the BCMCL is selling coal at $130 per ton to its nearby Barapukuria Thermal Power Plant. If the proposal is approved, we will also send a proposal to the higher authority for increasing the coal price,” Engr Md Kamruzzaman Khan, managing director of Barapukuria Coal Mining Company Limited told Dhaka Tribune on Monday.

He said the price of coal from BCMCL may rise to US$150 per ton.

Why only a single company?

The XMC-CMC consortium has been working as the contractor for the Barapukuria Coal Mine project since the inception of the mine in 2005.

The Bangladesh government has already made three consecutive agreements with the consortium, running till August 10, 2021. The latest renewal would be the fourth agreement, if approved by the Cabinet Committee on Public Purchase.

When contacted, Energy and Mineral Resources Division Senior Secretary Md Anisur Rahman told “Due to the Covid-19 situation, it is uncertain what kind of response we would get from an open tender. The tender might decrease the cost, but it may also increase the cost. We think a 4.97% increase is acceptable considering our estimates.”

He added that the Barapukuria Thermal Power Plant has enough coal reserves to last till January, and the current contractor would be able to ensure more coal before the reserves run out.

“A new company would need some time to get their production in order, and our power plant will be affected,” he said.

Why the price hike?

Officials of the Energy Ministry said the Chinese company had cited several reasons for the price hike, including cost of transportation for Chinese workers during the Covid-19 pandemic, quarantine fees, and the reluctance of Chinese worker’s to work in Bangladesh during the pandemic.

Initially, the Chinese company proposed a price 11.4% higher than the estimates of the Energy Ministry for the construction of underground roadways, coal extraction, operation, maintenance and other associated works of Barapukuria Coal Mine in Dinajpur.

After negotiation, the proposed price was reduced to 4.97% higher than the estimated cost, standing at $262.566,888.

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