People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 34

August 21, 2011


Towards a Democratic Regulation

Of the Mineral Sector

Archana Prasad


THE mineral sector has been under the monopoly control of the union government and has been facing several challenges, least of which arise out of the rapid and ill conceived policy of the liberalisation of the sector. Its problems have been well highlighted in the report on illegal mining by Justice Santosh Hegde which resulted in the resignation of the Karnataka chief minister. The report not only highlighted the lethal corporate-politician nexus behind illegal mining, it is also a revelation on the different aspects of the sector which need strict regulation. Some of these aspects include the question of mineral transportation, stock yard permissions and the methods of continuous monitoring that detect, record and punish rampant illegal mining. At the same time the growing conflicts in areas where land acquisition is taking place for mining have forced the State to revise its Mines and Minerals (Development and Regulation) Bill 2010 to consider the sharing of benefits with local people. The revised Bill of 2011 (which is yet to be introduced in parliament) reportedly proposes that 26 per cent of the royalty from profits of coal mining and royalty from operational mines of all other minerals will be shared by local people. The debate over the nature and quantum of benefit sharing assumes that beneficiaries will have no objection to corporate mining if they receive adequate long term benefits from it. This idea has been endorsed by some prominent environmentalists who see the long term local share in profits as a natural resource rent to the people who live in the mineral rich areas. While this is an important aspect of the debate, we need to take a more holistic view about the challenges facing the sector if a people-oriented legislation is to be put in place.




The question of benefit sharing and regulation has to be seen in the context of rapidly changing character of the mining sector. The introduction of private capital in mining and increase in profit mining has been evident in the last five years. The intervention of private mining companies has also led to a qualitative change in the scale of illegal mining. The case of iron ore mining illustrates the point. In reply to a starred question in Rajya Sabha, the minister of state for mines put forth a statement that only 190 mining leases were granted to central public sector units between 2003 and 2011, while in the same period about 9967 mining leases were given to private sector companies. Not surprisingly the Congress-ruled states of Andhra Pradesh and Rajasthan topped the list of the states with private companies, with Gujarat following suit. This was accompanied by the threefold increase in foreign direct investment in the sector. In reply to another question, the minister stated that such investment had gone up to Rs 1785.04 crore between 2008 and 2011.


But the growth of private companies does not reveal the true picture about the nature of extraction in the sector. The legal licences granted to private companies were accompanied by the equivalent if not higher extraction from illegal mining. The figures before parliament are instructive. A total of 36,677 violations were recorded in 2006 and this figure went upto 82,330 cases in 2010. This showed that private companies had increased their rate of extraction beyond imaginable limits. This increase is also a result of the lack of social control over any type of mining operations, a fact reflected in the Bill of 2010, which is the last public version of the proposed law for the sector. The Bill ignores the lessons of the Lokayukta report which points to the lack of records or local monitoring systems of illegal operations and stockpiling as the main reasons for the leakages. It hardly sets up any local structures that can monitor and report illegal mining on a daily basis. Perhaps it is time that the Indian administrators learnt from other countries like Canada and Australia where local self and regional governments make their own mining rules and where recognised ‘aborigine councils’ in mineral rich areas could make their own rules to curb and monitor mining activities. Hence the overall mining regulation in Canada lays down a framework for the role of the local self and regional governments in monitoring mining operations. In the process those impacted by mining will find a voice in keeping a vigil over daily mining operations, and also find a forum to register their complaints, thus increasing the social control over the sector.




The question of benefits and beneficiaries is also linked to the issue of social control over corporate mining. The returns in the form of royalty for minerals other than coal amounted to Rs 2610 crore in 2010-11 and this had declined sharply from Rs 3997.42 crore in 2009-2010. In some states like Maharashtra and Rajasthan the decline in royalty is seen from 2008 onwards. This means that a large extraction of minerals was taking place outside the formal system, leaving it out of the benefit sharing mechanism. It is therefore not surprising that the minister of mines, when asked in the Rajya Sabha, could not provide any information on whether 20 per cent of the proceeds from mining royalty were spent for the development of mining areas. The question of benefit sharing is therefore intimately linked with structures ensuring compliance and checking illegal mining. At the same time the question of benefits has to be seen in more than monetary terms. Mining affects health of people and material conditions (land, water, soil, biodiversity etc) of the surrounding villages. Is the amelioration of these factors and upgradation of the ecological infrastructure a part of the scheme of rehabilitation of the surrounding villages? If a mechanism is to be created for achieving this objective, then a development fund needs to be created out of mining returns. With the rapid growth of corporate capitalism in the mining sector it is not enough to simply speak of long term shares in profits. While this might be a step in the right direction to establish the principal of ‘natural resource rent’, it will not ensure the long term livelihood security of those living in mineral rich areas. This can only be done if the State ensures corporate compliance in eco-restoration of the area in the long term.




A third aspect that needs to be considered is that in India, the scope of mining regulation is very narrow. Current legislation largely covers only those activities like reconnaissance, prospecting and mining licenses which are connected with site level mining operations. All other aspects like environment clearances and land acquisitions are independent from this process of granting mining leases. Once a company gets a mining licence, it can apply for environmental clearance and once this clearance is got, the acquisition process begins. These processes are largely independent from each other and involve multiple agencies. Hence a project like POSCO may get conditional environmental clearance without a transparent and socially just land acquisition process. It is therefore important to think of a regulation that interlinks the process of land acquisition, environmental clearance and granting of mining leases. Here too, it is possible to learn from the developed countries whose laws for impact assessments and acquisition are sector specific. Thus a mining regulation incorporates the provisions relating to recognition of claims and rights, environmental impact and regulation of storage, transportation and other provisions, all in the same law. At the same time impact assessments have clear provisions for the involvement of local self governments, right from the stage of the screening of the project. It is therefore important to ask whether it is possible to introduce an element of ‘informed consent’ not only in impact assessment and acquisition but also for reconnaissance and prospecting as both these activities show the intent of mineral extraction. Getting consent of those affected by mining operations at every stage should be a structured and continuous process and rather than a one off event as is envisaged in current policies and laws of acquisition and clearance. It is another matter altogether that the question of social control and consent is ignored in all mining regulations that exist at present.


It is difficult to say whether such provisions will contribute towards lessening the conflicts arising out of corporate mining leases. But they will certainly start a process of democratic decision making in the mining sector itself. Hence the provisions of PESA (Panchayats Extension to Scheduled Areas Act) may be used and suitably amended to set up monitoring structures at the panchayat levels. At the same time the convergence between local forest administration and panchayats also needs to be strengthened in order to ensure that illegal operations are checked. This is particularly important because there are very few instances where outright violations were a result of large encroachments. Rather most violations were done by companies who already have mining rights but are exceeding their permissible limit. Hence there are cases of over-extraction, stockpiling and illegal transportation, the most prominent of which came to light after the Supreme Court banned all mining of iron ore in Bellary district. The question is that if such violations are rampant because of the ruling class-mining mafia nexus, then the only way of checking such acts is by ensuring compliance through increased social control of elected institutions.