INTERVIEW-ICCB suggests Bangladesh use coal for power

* The country has 3.4 bln tonnes untapped coal

* Suggests open pit mining as right method

DHAKA, April 18 (Reuters) - An international business group on Sunday urged power-starved Bangladesh immediately to explore and use a huge reserve of coal to generate electricity to cut dependence on natural gas.

Last week, the Paris based International Chamber of Commerce, Bangladesh (ICCB) chapter, held a conference in Dhaka attended by experts, investors and delegates from 20 countries to discuss mining coal for generating power.

The ICCB submitted its recommendations to the Bangladesh government on Sunday, suggesting that Bangladesh should produce electricity with its own coal to ensure a reliable and sustainable future of energy, the group’s president Mahbubur Rahman said.

“We also suggest government go for open pit mining and follow easy bidding to attract private sector investors both at home and abroad,” he told Reuters in an interview.

Bangladesh has six coal fields with more than 3.4 billion tonnes of low sulphur coal but has yet to extract those as the government remains undecided about how to progress.

“We recommended that the open-pit method should be followed wherever feasible, taking into consideration the socio-economic issues like rehabilitating the affected people and also loss of arable lands,” Rahman said.

A mining authority could be set up to deal with the rehabilitation and relocation of affected people, and to ensure accountability and transparency.

Rahman said there was nothing wrong with mining coal for power generation, adding that India produces 68 percent of its electricity by coal.

The recommendations also include setting up more rental power plants, long term supply agreements with investors, adequate incentives for them, upward revision of tariff, and a strong political will for achieving energy security.

“Bangladesh should immediately start modern, safe, and environment-friendly extraction of coal from mines within the framework of a national coal policy,” the ICCB chief said.

Half of the 30,000 megawatt power generation target by 2020 has to be achieved through coal-powered plants, he added.

He said that several foreign investors had showed interest in investing in the sector as Bangladesh’s economy had been growing by 6 percent a year on average over the past five years despite domestic and international hurdles.

“Returns from power project financing in Bangladesh are estimated at 20 to 25 percent, much higher than what it is in many other countries,” he said.

The risk factors however lie with the transparency of agreements, tariff structure, fuel supply, regulatory and legal framework and political instability.

“The tender process must be simplified and made transparent within a specified timeframe, to enhance attractiveness of the sector to foreign investors,” he added.

Editing by Elaine Hardcastle