Metamorphosis of mining policy

In India, policy often becomes dead on arrival

By Sunita Narain
Last Updated: Wednesday 29 July 2015

There is a science and art of policy-making. In India, this is confounding and abstract. But what stands out is that the intent and form of policy-making begins somewhere and ends somewhere else—as it moves between desks, competing interests and even governments, it evolves or gets distorted so that the final product looks very different. But that is not the end of the matter. By the time a policy is decreed into law, the original proponents become cynical or lose interest in its implementation. Policy then becomes dead on arrival.

Let me explain why I am saying this.

In the mid-2000, mining was the sunshine sector. India was digging for minerals like there was no tomorrow. The government set up a committee under the then member of the Planning Commission, Anwarul Hoda, to suggest changes in the mining policy. This was also the time when we at the Centre for Science and Environment (CSE) were researching this sector. The Hoda committee focused primarily on mineral extraction. Our focus was the interconnection between mineral wealth, forests and water—also found where minerals are found—and the fact that people who lived in these rich lands were the country’s poorest.

In 2007, another committee was formed, this time under the then home minister Shivraj Patil to examine the Hoda report recommendations. We pushed our way into this committee, making a presentation on the need to reform the 1957 Mines and Minerals (Development and Regulation) Act, or MMDR Act, to account for environmental safeguards and share revenues with local people.

Then in 2009, the Union Ministry of Mines, headed by an extraordinary bureaucrat, began rewriting the 1957 law. The first draft of the revised MMDR Act decided to make people partners in mining operations by giving them equity in mining companies. But the very idea of sharing benefits with people was too much for mining companies. The Federation of Indian Mineral Industries went as far to say that if money was given then “tribal men would drink and beat their wives”.

But better sense prevailed. It was decided that instead of equity, companies would give 26 per cent of their profits, which would be channelised directly into the accounts of the affected people. As I said, policy-making in India is confounding, so meeting after meeting was held to evolve consensus and each time it was an effort to keep the benefit-sharing provision intact.

By the time MMDR Bill, 2011, was tabled in Parliament, the original idea remained but in a different form. Instead of sharing profits, it was decided that mining companies other than coal would give equivalent royalty to the district mineral foundation; coal would give 26 per cent of the profits after tax. The law made it clear that this money was to go to the affected people. However, UPA II did not push for this bill and after two years as Parliament dissolved it lapsed.

The new NDA government instead of rewriting the 1957 Act, brought in an amendment, mostly to move to auction of mines for greater revenue and transparency in allocation. In this amendment, now passed by Parliament, the provision on benefit sharing remains, but it has lost its intent. Now the district mineral foundation (DMF) is to be set up in all areas “affected by mining related operations”.

Holders of mining leases will pay to the foundation of the district in which mining is done a sum, “which will not exceed one-third of the royalty” in the case of new leases and “equivalent to the royalty” in case of old leases. The amendment lets state governments set the rules for the foundation, including its composition. But it does say that the object of this foundation will be to work for the “interests and benefits of persons and areas affected by mining related operations.”

My colleagues have calculated that DMFs in big mining districts will get substantial inflows of funds. At current royalty rates districts like Keonjhar would get some Rs 600 crore annually. It is possible to use this money for the direct benefit of the affected people as well as to invest in their future assets. Now the question is who will make the rules to ensure that the money reaches where it belongs?

By now the original proposal is long gone. However, in this case, CSE as the proponent of the idea remains. The first draft of dmf rules, from Rajasthan, focuses on the use of money. It has no idea that this provision was meant to give people a stake in the rent on natural resources. It was meant to profit them so that it leads to inclusive growth. In the great Indian policy bazaar the challenge is to ensure that even this not-so-great policy is used as per its original intention and to find ways to implement it so that it can do what is was meant to do: bring change in the lives of the poor.

I will keep you posted on the updates on this issue.

Subscribe to Weekly Newsletter :
Related Stories

India Environment Portal Resources :

Comments are moderated and will be published only after the site moderator’s approval. Please use a genuine email ID and provide your name. Selected comments may also be used in the ‘Letters’ section of the Down To Earth print edition.

  • The DMF would be setup by the government and should include besides the people from various departments like: mining, forest, the representatives of the affected people which may include tribal and other people, departments concerned with re-settlement of these people along with rehabilitation and livelihood, skill development, education, health, water and power. Representative of the organisation to whom the mining area have been leased/sold along with the organisation who are going to use the raw material and coal, if located nearby, such as: steel plants and thermal powerhouses.

    The funds put at the disposal of DMF should be utilised for educating and providing skill to all young people from age 18 to 40 years, so as to make them free to choose the type of livelihood they would like to change to and provide funds for their new occupation. Which would be mostly in the services sector and small and medium industries. Small towns of 1.5 lakh people either by upgrading the existing small towns or making a new one nearby would be required, to create jobs. The people above 40 who cannot learn any new skill should be provided suitable means of livelihood. A separate professional team should be setup for planning designing and implementation.

    The mining areas are mostly covered by forest and some small areas by agriculture. Thus, land use is being changed which may affect the production of agriculture. Reduction of forest area my affect ecology and environment in the long run (2050). Mining could be done, either underground so as to avoid cutting of forests or if it is open mining it could be done in stages by mining for 3 to 5 years at a time and then restoring it back to the forest. It may be desirable not to develop the full potential of the mining area but only what is really required in India and not exporting it.

    The monitoring of this work should be done by a separate organisation. Who should go to the site of the work and talk to the affected people as to how the progress is being made, rather than expect for the complaints to be made to them. They should not be required to go to each department for getting the work done properly and in time.

    The rules and regulations to be framed should take care of these aspects. At the state level a regulatory body for land and water use should be setup, which has been done in some states.

    G N Kathpalia

    Posted by: G N Kathpalia | 4 years ago | Reply