Metamorphosis of mining policy

In India, policy often becomes dead on arrival. 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 mining companies other than coal would give equivalent royalty to the district mineral foundation; coal would give 26% 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.

By Sunita Narain