Governance failure

How agencies meant to regulate mining conspired in the loot

By Chandra Bhushan
Published: Wednesday 31 August 2011

Governance failure


Mining in India is regulated by multiple institutions functioning at multiple levels to provide checks and balances. In Bellary, however, every department and agency supposed to regulate and control mining simply collapsed under the weight of the “loot”. Bellary, therefore, represents a colossal failure of governance.

There are seven ministries and departments directly responsible for regulating mining and its environmental and social aspects. Here is a look at how they failed.

Union Ministry of Mines: It is responsible for legislation and regulation of mines and development of minerals. It administers the Mines and Minerals (Development and Regulation) (MMDR) Act of 1957, the foremost mining law of the country. Prior approval of this ministry is required before a state government can grant mining concessions for large mines. The ministry not only completely failed to see what was happening in Bellary it also failed to raise royalty on iron ore. When the price of iron ore rose above Rs 3,500 per tonne, the royalty that it fixed was a mere Rs 16-Rs 27 a tonne, resulting in a massive loss to the public exchequer.

Indian Bureau of Mines: The premier mining regulatory body not only approves mining and environmental management plans, but also enforces these plans under the Mineral Conservation & Development Rules of 1988 and certain provisions of the Environment (Protection) Act of 1986. It is supposed to inspect mines regularly, prosecute violators and has powers to suspend mining activities. The bureau’s primary role is “conservation of minerals and protection of environment”. In Bellary, it failed on both counts. It allowed iron ore production to expand four-fold in 10 years and approved new mine leases in forest areas despite massive ecological degradation and wanton exploitation of minerals.

The Lokayukta report says the bureau used flawed methodology to arrive at the value of minerals on which royalties are charged by state governments. India lost huge royalties from iron ore because the bureau undervalued minerals.

State department of mines: It undertakes mineral exploration, sanctions prospecting and mine leases and collects royalties. It is supposed to inspect mines and ensure mining plans are followed. It checks illegal mining and transport of minerals and also issues transit permits for transport of minerals. The department failed to execute these responsibilities and has been indicted for facilitating illegal mining and transport of minerals from encroached forestland. It even allowed mining to continue beyond expired leases, resulting in lower collection of royalties. The department also allowed an illegal practice called “raising contract”, banned under the MMDR Act.

Directorate General of Mines Safety: The regulatory agency under the Union ministry of labour and employment ensures occupational safety, health and welfare of mine workers. It ignored use of child labour and exploitation of women and contract labourers in Bellary. Most mine workers in Bellary are contract workers who work and live in abysmal conditions.

Union Ministry of Environment and Forests (MoEF) and State Environment Impact Assessment Authority (SEIAA): In 2001, MoEF put a stop to issuing fresh mining leases or renewing existing leases in Bellary and asked the Karnataka government to conduct a detailed environmental impact assessment for the entire region. NEERI at Nagpur carried out the assessment and prepared an environmental management plan in 2004. It was never implemented. MoEF, nevertheless, withdrew the moratorium and started giving unrestricted clearances. In October 2010, the then environment minister Jairam Ramesh declared no diversion of forestland for mining in Bellary. But the ministry allowed such diversions as late as March 2011. Interestingly, MoEF did not declare Bellary as a critically polluted area when it released its list of polluted areas in the country in 2010.

In 2006, SEIAAs were set up to grant environmental clearance to mining projects in 50 hectare areas or less. This opened the floodgates. Since 2007, Karnataka SEIAA has cleared more than 25 iron ore mines in the state; 19 of them are in Bellary. SEIAAs are turning out to be institutions which are held least accountable for their actions.

Karnataka State Pollution Control Board: It has not prosecuted even one mining company despite violation of environmental laws and the visible environmental degradation. It failed to even monitor the level of environmental degradation in the region.

Forest department: Its failures are colossal. Over 90 per cent of the mining leases in Bellary are in forest areas. The forest department colluded with mining companies and allowed encroachment of large tracts of forestland. It issued transit permits to transport illegally mined ore though forests. In return, the department levied a forest development tax (see ‘Republic of Bellary’).

Besides these agencies, the district administration, too, colluded with mining companies; the railways and port authorities did not differentiate between transportation of legal and illegal ore and the customs department turned a blind eye to duty evasion. All departments had their snouts in the trough and there was no one to question them.

Lessons from Bellary

Bellary highlights the lack of accountability of our institutions and the failure of checks and balances that we have instituted. The systemic failure of institutions, therefore, should be viewed more seriously than all the illegalities and environmental degradation that occurred in Bellary. Bellary is not unique in that it is a model of all transgressions in most mining belts of the country—Singhbhum (West) and the coal belt of Jharkhand; Keonjhar, Ib valley and Sundergarh in Odisha; Kutch, Jamnagar and Junagarh in Gujarat; Raigarh in Chhattisgarh and Goa. The list is unending. We must learn from the failures of Bellary.

In our governance system, everyone has powers but no accountability. This must change. First and foremost, we need to fix accountability in government institutions. Regional officers of pollution control boards must be held responsible for overall environmental degradation. Members of the expert appraisal committee of MoEF and of SEIAAs who give environmental clearance must be held accountable. Forest department officers must be held responsible for illegal mining in forestland. Inspectors of the mines bureau who clear errant mines must be prosecuted. Transparency in allocation of mining concessions and restructuring mining institutions must be our next priority. The draft Mines and Minerals (Regulation and Development) Bill of 2011, which will replace MMDR Act, will help. But the mines ministry must review the bill learning from the Bellary mistakes. The draft bill, which is hanging fire under the pressure of the industry, must be passed quickly.

Bellary also showcases how environmental and forest clearance processes are not working. Individual factories and mines are cleared without considering their cumulative impact on the environment. Cumulative regional impact assessments must become a part our system of environmental clearance.

Double whammy

Bellary supposedly has one billion tonnes of iron ore reserve. But it will not last. The existing capacity of iron and steel plants in Bellary is 27 million tonnes. Further, land has been allotted to Mittal, Essar, Bhushan and Brahmani steel companies. South Korean steel giant POSCO is also setting up a plant near Almatti dam. In a few years, the total steel manufacturing capacity in Bellary will touch 50 million tonnes. This will require about 125 million tonnes of iron ore every year—about three times the current level of mining. It means the total iron ore reserves will not last even 10 years. To produce 50 million tonnes of steel, large quantities of water will be diverted from the Tungabhadra and Almatti dams. The combined effect of mining and steel production will be catastrophic for Bellary.

A cumulative environmental assessment must be undertaken immediately to arrive at a sustainable level of mining and steel production. In addition, the government must initiate an action plan to restore mined areas and regenerate forests and ecology. Till this is done, the mining moratorium must continue.

Republic of Bellary

Bellary had many unique attributes. It had a minister in-charge of the district— Janardhan Reddy—who lorded over the district administration. This is a unique system in Karnataka where ministers are assigned districts. The state also levied many taxes on Bellary’s iron ore, not found elsewhere in India:

  • Forest development tax @ 12 per cent of sales price
  • Iron ore development tax
  • Road tax @ Rs 500 per truck
Then there was dust-per-crop compensation of about Rs 3,000 per 0.4 ha that mining companies paid farmers for damage to fields. This was adjudicated by the state pollution control board. The profits were so huge and illegality so widespread that not even one company objected to these taxes.

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