Phulbari Coal Project

ADB’s Private Sector Arm Considering Funding Controversial Coal Project in Northwest Bangladesh

Global Coal Management (PLC), a UK-listed company, is awaiting official approval from the Bangladesh Government to operate an open pit mine that would extract 15 million tonnes of coal/year from Phulbari, a key rice producing area that contributes to the food basket of Bangladesh. GCM, through its Bangladeshi subsidiary, Asia Energy, proposes to mine for over 30 years. The project has fuelled a strong grassroots movement in the Phulbari area and has raised major environmental, social and human rights concerns for both the indigenous and local residents of Phulbari.

Project Specifics

Eight million tonnes of coal would be exported by rail and barges through the Sundarbans, one of the three largest mangrove forests in the world which is also an international Biosphere Reserve by UNESCO. Four million tonnes would be transported to India through the rail network and three million would be used for domestic consumption. GCM has proposed a 500 MW powerplant at the mine site. According to the Summary Environmental Impact Assessment (SEIA), the project would relocate 40,000 people (9000 households) and cover an area of 5,192 hectares (ha); the open pit at any given time would cover an area of 2,180 ha.

ADB Involvement

Asian Development Bank’s Private Sector Operations Department (PSOD) is promoting this project for an investment loan and a political risk guarantee in spite of major setbacks to the project (see below). PSOD staff believe that the project will economically benefit Bangladesh and provide it much needed energy. ADB has approved the SEIA and is awaiting final resettlement action plans and indigenous people’s plans. Under ADB rules, the private client interested in ADB funds can also conduct the mandatory studies required for high environmental and social impact projects such as Phulbari. ADB “safeguard specialists” on involuntary resettlement, environmental impacts and indigenous people are expected to approve these studies before the project is sent for Board Approval.

PSOD cleared the concept for this project on 14 October 2005. Civil Society Organizations contend that the project violates ADB’s Energy Policy (1995), Indigenous Peoples Policy (1998), Involuntary Resettlement Policy (1995), Environment Policy (2002), and Public Communication Policy (2005).

Shooting on Mass Protest, August 26, 2006

On August 26, 2006, Bangladesh Rifles fired upon a crowd of over 20,000 people as they staged a protest against the proposed open pit mine. Three people from Phulbari were killed in the shootings, one was paralyzed, and several hundreds were injured. Following this incident, GCM was forced to shut down its operations; GCM staff’s property was burned and the Government signed an agreement with the local municipalities to shut down Asia Energy operations. Since then, a state of emergency was declared in Bangladesh and an interim government has been formed. The interim government has set up a Committee to prepare a Coal Policy for Bangladesh. Many expect Phulbari Coal Project’s fate will be determined by the outcome of the Coal Policy negotiations.