Bangladeshi government has doubled the rate of royalty imposed on coal producers after eight years. Henceforth, the miners would have to pay 10% royalties for the amount of coal extracted from the mines, which was fixed at 5% since 2012.
The amendment was carried out by Power, Energy and Mineral Resources ministry in a bid to increase revenue.
It is pertinent to note that royalty paid by country’s sole coal producer, Barapukuria Coal Mining Company (BCMCL) was recorded at BDT 506.38 Million during FY19, which had witnessed a dip of 49% from BDT 997.42 Million in FY18.
With the rise in royalties, the government has aimed to generate higher revenue from coal-mine extraction. But the consequent announcement is likely to lower BCMCL’s earning.
At present, BCMCL only sells coal to the state run power utility, Bangladesh Power Development (BPD) at a subsidized rate of USD 130/MT (with VAT exempted) which has been in effect from 1 Jul’17.
Although, there has been a gradual rise in selling price of coal which was primarily fixed at USD 61.5/MT in May’2001. However, a considerable expenditure on account of various taxes and payment to contractors limits BCMCL’s cost margin involved in mining operation.
Notably, due to dearth of skilled and technical manpower in the country, the coal producer had entered Management, Production, Maintenance and Provisioning Services contract with China National Import and Export Corporation, in order to extract coal from the mine.
The miner is entitled to pay a sum of USD 81/MT under the contract valid up to 10 Aug’21.
Barakupuria’s Performance in FY19:
The FY19 was not a fruitful phase for BCML in terms of performance. The miner had reported a decrease of 13% in annual coal production to 805,695.63 MT as against 923,276.08 MT in FY18, thus attaining its lowest total in past four fiscals.
Besides, the company’s earning through coal sales to the non-power sector was also affected by government’s decision to cease selling of coal to local buyers since 19 Mar’18.
Incidentally, sales to local industries were merely reduced to 894.19 MT in FY19 as against 274,144.79 MT in FY18, because no supplies were made to them ever since the official order was inflicted.
(Bangladeshi fiscal year runs for a 12-month period starting from 1st July to 30th June)
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