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Wishing away the resource curse

The government recently amended the Mines and Minerals (Development and Regulation) Act 1957 (MMDR Act). This was to provide for the creation of District Mineral Foundations (DMF) in mining-affected districts, with a provision for payments to DMFs over and above royalty and, in the case of auctions, also of the auction amount for mineral concessions.

The ceiling is "an amount equal to royalty" in the case of royalty in non-auctioned (legacy) leases and "one-third" of royalty in auctioned leases. The government has notified the actual rates lower; at 30 per cent in the case of legacy mines and 10 per cent in auctioned mines.

Owing the resource

"An amount equal to royaltyā€¯ actually reinforced a principle; in a sense, local communities are owners of the resource and, hence, they should get an amount equal to what the government as owner gets - the royalty. From the point of view of assuaging sentiments of local communities, it is an important principle. It is essential, therefore, that this principle should be made non-discretionary.

After the amendment, local communities will actually get only 10 per cent in the long run, since auctions will be the mode in future. To do justice to those who lose out if auctions are conducted, the same amount should be fixed as contribution to DMF, irrespective of the mode of concessions because they suffer in both cases, and the auction should factor in this amount.

From mining companies' point of view, having a royalty rate, a DMF rate for legacy mines, and a DMF rate for auctioned mines, all separately determined, is messy and prone to arbitrariness. This also leaves scope for pulls and pressures.

The solution would be to keep the royalty rate as the variable and derive contributions to the DMF, preferably, based on the "amount equal to royalty" principle. The royalty rate can be revised as required from time to time.

The mines ministry has directed States to incorporate the Pradhan Mantri Khanij Kshetra Kalyan Yojana to provide a framework for planning by the DMF. It is important the planning at the DMF level also adheres to the Sustainable Development Framework for the mining sector already developed by the ministry.

It is also important that DMF funds should be in addition, and not in substitution, to the normal government budget for developmental programmes for these areas. The provision of funds for the DMF must be accompanied, particularly in tribal areas, by measures to improve local governance; or the purpose will not be achieved.

Adverse impacts

Local populations often suffer the consequences of mining. It affects their health, quality of life and habitat and livelihoods. Opposition to mining is, therefore, growing by the day in India, and needs to be addressed by measures to reduce adverse environmental, economic and social impacts.

One of the major problems in mining which remain unaddressed is the cumulative and regional level adverse impacts. While lease-level impacts are the sole responsibility of the miner and needs to be managed and mitigated by him, regional level impacts are nobody's baby.

The Supreme Court's intervention in Bellary and Goa were primarily on this account. The Sustainable Development Framework developed by the mines ministry in 2011 provides a good starting point and should be the basis for district level perspective plans to reverse the degradation, using DMF funding.

The rampant illegal mining and degradation is now well admitted as being a regulatory failure. Securing a stream of funds to the DMFs for creating socio-economic infrastructure is not a substitute for better enforcement of Mine Plans and Mine Closure Plans and Environment Management Plans.

Rather than credit all the auction proceeds into the state exchequer, it would be better to sequester a small proportion, say 10 per cent, for improving regulatory systems in the State and mining districts, and creating special courts to deal with offenders.

Mining is necessary for the nation's development. But it can and must be done with less damage to the environment and local communities. This calls for a multi-pronged approach. The payment stream to the DMF is but one element.

The other elements, including environmental and mining-related regulation, local governance and normal development activities must all work along with it. Otherwise, a perception may develop that the DMF is just a pay-off to local communities while the mining sector continues its business as usual.

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