A GROUP of Ministers (GOM) has reportedly proposed that Coal India should set aside 26 percent of its net profit to be credited to a district- level fund to develop the area where it mines. For other minerals, the corresponding contribution is to be restricted to a much smaller amount, equivalent to the royalty payable.
The new policy differentiates between the coal public sector undertakings and other mining companies on the grounds that coal prices are administered whereas other minerals are subject to market prices. A more plausible reason for this is the government’s eagerness to benefit the private companies who mine bauxite, iron ore and barytes. These companies already benefit from the dirt cheap prices or royalties at which minerals are doled out to them. One is aware of the controversial deals in iron ore mining in the case of POSCO, Bellary, Bayyaram and bauxite mining in Odisha and Andhra Pradesh
The GOM’s decision, in a way, reflects the way mineral development policy has evolved over the years, driven largely by the strong mining lobby that is omnipresent, within and outside the government. Minerals in India are found in the hills and forest tracts of a few states, inhabited largely by the tribals. They are located mostly in the areas notified under the Fifth Schedule, where the tribals are entitled to special rights to the land as well as forests and mineral resources. Article 48A of the Constitution obligates the State to protect the forests. In addition, there are other laws such as the Forest Rights Act that entitle local low-income households to land ownership. The mining policy of the government should evidently be consistent with these statutes.
Mining per se displaces tribals, deprives them of their rights and destroys the local environment. Insensitive to these negative impacts, during the past several decades, successive governments have allowed both PSUs and private companies to violate the statute.
In July 1997, in the well-known Samata case, the apex court reminded the government about its statutory obligations and held that the right to mine any notified area should rest with the tribal or the government, and no one else. The mining lobby started inciting the Centre and the states to neutralise its effect. The Ministry of Mines was quick to act by promptly proposing an amendment to the Fifth Schedule but, fortunately, it failed to go through.
These firms already benefit from the dirt cheap prices at which minerals are doled out to them
When the Hoda Committee submitted its report in 2006, it gave yet another opportunity to the government to remove the statutory ‘hurdles’ to mining. In the guise of giving importance to the mining sector as a major contributor to economic growth, the government started opening up mining areas to domestic and foreign investors on a large scale and in that process, tried to wink at statutory violations and people’s displacement. To cover this up, the government came up with sops for the displaced families, knowing well that the latter had inalienable Constitutional rights that could not be compromised through incentives.
Last year, the ministry proposed that the affected people should be entitled to 26 percent equity of the mining company in each case. The industry rejected this. The ministry then altered the proposal to provide 26 percent of the net profits for developing the area around mining. It is well known how corporates understate their profits to evade taxes. The latest proposal too was rejected by the industry. The GOM appears to have finally bowed down to the wishes of the mining lobby and agreed to bring down the “burden” further to an amount equivalent to the royalty. Royalty rates are ridiculously low, having no relationship whatsoever with market prices. Of course, since Coal India is a PSU, the GOM thought the company could do with a slightly heavier burden.
In the end, it is evidently the mining lobby that has had its last laugh. It is the tribal, as usual, that has lost.
Eas Sarma is Former Energy Secretary.