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Will India Be Able to Mine Its Way to a $5 Trillion Economy?

What are the 13 major reforms in India’s mining sector and how will they affect the tribal majority areas?

Published
Explainers
6 min read
Image used for representational purposes. 
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With a struggling economy amid the pandemic, the Narendra Modi government is seeking recuperation in all sectors, with the mining industry being the latest in line to face excavation. Bringing in as many as 13 major reforms in India’s mining sector, the Rajya Sabha passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2021, (MMDR) in the recently concluded Budget session.

Mining has always been an underground source of power. Regardless of its complexities and corruption, and its ill-effects on an area’s biodiversity and livelihood, mining, as an industry, supports our infrastructural and manufacturing industries and carries on it the burden of making India a $5 trillion economy.

Though renewables (solar/wind) are growing in India as a measure to tackle climate change and bring in clean energy, the country remains heavily reliant on coal and will continue to do so for years to come.

With the changes proposed in the MMDR Amendment Bill, the mining industry is going to receive a thrust in a no-holds-barred approach by the government. What are those changes? We explain.

Will India Be Able to Mine Its Way to a $5 Trillion Economy?

  1. 1. Choosing Profit Over Sustainability?

    Captive mines are those where the mine leased to the company is for a particular end-use (such as an iron ore mine used for a steel plant). Non-captive mines are those where the lease holder can sell the mineral extraction in the open market (such as fuel).

    One of the major changes proposed is the removal of restriction on the exclusive use of minerals. The Bill provides that no mine will be reserved for particular end-use, allowing captive mines to sell their extraction in the open market as well.

    The Bill also provides that captive mines (other than atomic minerals) may sell up to 50 percent of their annual mineral production in the open market after meeting their own needs. The central government may increase this threshold through a notification.

    The two amendments effectively remove the differentiation between captive and non-captive mines. More importantly, this also means that any talk of sustainability has been replaced with the priority of profit.

    Kanchi Kohli, senior researcher at the Centre of Policy Research, told The Quint that the regulatory balance is titled towards creating a favourable environment for mineral extraction and transportation.

    However, the institutional framework that can check the rampant non-compliance of environmental safeguards is often weak and in most cases non-existent. These illegalities are directly responsible for decades of pollution, over extraction of water, illegal tree felling or land alienation.

    “Our environment regulations are not designed to assess environmental impact of dynamic footprint of mining and its enabling infrastructure. Before a project is undertaken, project proponents submit an impact assessment, mitigation and compensation measures based on a specified mining plan. This is what makes it possible to define an impact area including that of transportation,” Kohli explains.

    She further adds, “With the removal of restriction on end-use, the footprint of mineral extraction will constantly shift. But our regulatory system do not account for reviewing the ecological and social viability of this shifting footprint.”

    Expand
  2. 2. Whose Land Is It Anyway?

    Public hearings are a vital part to get the environment clearance for projects, as the people who will be affected by the project get the chance to bring out their concerns to the government’s notice. However, the process of public hearings and consultations have been diluted over and over again.

    The Union Ministry of Environment, Forest and Climate Change (MoEFCC) in April 2018 had asked mining companies who had the environmental clearance under the Environment Impact Assessment (EIA) notification 1994 to apply for the clearance under EIA notification 2006.

    Now, in February 2021, the MoEFCC came out with an order in which it said that if mining companies had taken the environmental clearance under the EIA notification 1994 after a public hearing, then they could get the clearance under EIA notification 2006, without warranting another public hearing.

    This could again lead to deliberate ignorance of legacy issues concerned with non-compliance of safety protocols or their blatant violation.

    Nonetheless, the adivasis living in mineral-rich areas continue to suffer displacement, loss of land and forest rights, through which they in turn lose their livelihoods, having no option but to work for the mines or resist their enterprise.

    In a report titled, ‘Locating The Breach’ by Land Conflict Watch, it has been highlighted that land conflicts over mining projects are the second highest cause of distress, with more than 8.5 lakh people affected.

    It was further noted that 60 percent of all mining related conflicts are found in Fifth Schedule districts (tribal majority areas).

    Expand
  3. 3. Steps to Alleviate Suffering?

    To alleviate the sufferings of people affected by mining, the MMDR Amendment Ordinance promulgated in 2015 provided for the creation of District Mineral Foundations – or DMFs – by state governments.

    Under the scheme, a mining lease holder is supposed to pay 10-30 percent royalty to the DMFs, in addition to the royalty paid to the state.

    The guidelines said that 60 percent of the DMF funds have to be utilised for ‘high priority sectors’ such as drinking water supply and education, while 40 percent is earmarked for ‘other priority sectors’ such as physical infrastructure, energy and cowshed development. The total collection of the DMFs stood at over Rs 45,000 crore in September 2020, The Financial Express reported.

    The MMDR 2015 Ordinance stated, “The composition and functions of the DMF shall be such as may be prescribed by the state government.” Now, the proposed 2021 Bill reads, “Provided that the Central government may give directions regarding composition and utilisation of funds by the DMF.”

    This takes away a state’s discretion in spending these funds for the benefit of the people and the areas affected – and strikes at the heart of cooperative federalism, something that seems to be losing its value more and more.

    Even when the Bill was proposed in August 2020, states were given a window of just 10 days for feedback, Scroll reported.

    RJD member Manoj Jha while referring to mining mafias said, “I have not seen a single Bill in the last three years which strengthens the foundation of cooperative federalism. I can see ‘Gangs of Wasseypur’ developing from these 13 reforms. There is no mention of people who live around these resources.”

    Expand
  4. 4. The Road to Privatisation

    The new law removed the end-use restriction for participating in coal mining auctions and unwrapped the sector for private players to mine commercially.

    According to PTI, Union Minister of Coal, Mines and Parliamentary Affairs Pralhad Joshi told the Lok Sabha on 15 March 2021, “The reform in the mining sector would generate 55 lakh direct and indirect jobs. To enhance mining activity, we will allow the private sector with enhanced technology in mineral exploration.”

    Approximately 23 lakh people were employed in the Indian mining sector in 2011-12, The Economic Times reported. Joshi said that India has the same potential as South Africa and Australia, but the mining sector had remained under-explored.

    “Currently, the contribution of the mining sector, putting all together, is around 1.75 percent of the GDP and we want to take it to 2.5 percent,” Joshi added.

    “We want to bring private players into this because we have rich minerals like coal, gold, and silver, but we are not being able to bring it out. That’s why we are bringing these changes and trying to redefine exploration.”
    Pralhad Joshi

    Congress MP Digvijaya Singh said that the district where most minerals are found are also the homes of the poorest of people. He further said that since most mines are located in tribal areas, the Bill must include a provision for seeking consent of the Gram Sabha before the mining operations begin. He added that bringing in private players will be damaging to the labourers’ interests.

    Privatisation also increases the risk of a monopoly and in an industry already ridden with corruption, the implementation of safeguards will become gruelling.

    Expand
  5. 5. Opposition to the Bill

    Eleven out of 14 parties represented in the House requested that the Bill be referred to the Select Committee, according to a report by LiveLaw.

    YSR Congress leader V Vijayasai Reddy called the Bill “anti-public sector”, while Telangana Rashtra Samithi MP K Keshava Rao asked the central government not to “repeat the mistake” it made with agricultural laws, PTI reported.

    Joshi responded to these demands for scrutiny of the Bill and said, “The Bill was circulated to states and 10,500 comments were received.”

    However, the Mineral Inheritors Rights Association had filed an application under the RTI Act questioning the ministry on how many comments had they received as feedback, how they were assessed and if any suggestions were implemented.

    In response, the Ministry of Mines said it considered only those comments that were “committed for reforms”, indicating that criticisms and questions were disregarded.

    CPI(M) member Jharna Das Baidya said, “Minerals are permanent assets of this country. We should ensure that they are properly utilised for the benefit of the country and not for the benefit of a few people.”

    (With inputs from Scroll, Newsclick, The Financial Express, The Economic Times, LiveLaw and PTI.)

    (The Quint is available on Telegram. For handpicked stories every day, subscribe to us on Telegram)

    Expand

Choosing Profit Over Sustainability?

Captive mines are those where the mine leased to the company is for a particular end-use (such as an iron ore mine used for a steel plant). Non-captive mines are those where the lease holder can sell the mineral extraction in the open market (such as fuel).

One of the major changes proposed is the removal of restriction on the exclusive use of minerals. The Bill provides that no mine will be reserved for particular end-use, allowing captive mines to sell their extraction in the open market as well.

The Bill also provides that captive mines (other than atomic minerals) may sell up to 50 percent of their annual mineral production in the open market after meeting their own needs. The central government may increase this threshold through a notification.

The two amendments effectively remove the differentiation between captive and non-captive mines. More importantly, this also means that any talk of sustainability has been replaced with the priority of profit.

Kanchi Kohli, senior researcher at the Centre of Policy Research, told The Quint that the regulatory balance is titled towards creating a favourable environment for mineral extraction and transportation.

However, the institutional framework that can check the rampant non-compliance of environmental safeguards is often weak and in most cases non-existent. These illegalities are directly responsible for decades of pollution, over extraction of water, illegal tree felling or land alienation.

“Our environment regulations are not designed to assess environmental impact of dynamic footprint of mining and its enabling infrastructure. Before a project is undertaken, project proponents submit an impact assessment, mitigation and compensation measures based on a specified mining plan. This is what makes it possible to define an impact area including that of transportation,” Kohli explains.

She further adds, “With the removal of restriction on end-use, the footprint of mineral extraction will constantly shift. But our regulatory system do not account for reviewing the ecological and social viability of this shifting footprint.”

Whose Land Is It Anyway?

Public hearings are a vital part to get the environment clearance for projects, as the people who will be affected by the project get the chance to bring out their concerns to the government’s notice. However, the process of public hearings and consultations have been diluted over and over again.

The Union Ministry of Environment, Forest and Climate Change (MoEFCC) in April 2018 had asked mining companies who had the environmental clearance under the Environment Impact Assessment (EIA) notification 1994 to apply for the clearance under EIA notification 2006.

Now, in February 2021, the MoEFCC came out with an order in which it said that if mining companies had taken the environmental clearance under the EIA notification 1994 after a public hearing, then they could get the clearance under EIA notification 2006, without warranting another public hearing.

This could again lead to deliberate ignorance of legacy issues concerned with non-compliance of safety protocols or their blatant violation.

Nonetheless, the adivasis living in mineral-rich areas continue to suffer displacement, loss of land and forest rights, through which they in turn lose their livelihoods, having no option but to work for the mines or resist their enterprise.

In a report titled, ‘Locating The Breach’ by Land Conflict Watch, it has been highlighted that land conflicts over mining projects are the second highest cause of distress, with more than 8.5 lakh people affected.

It was further noted that 60 percent of all mining related conflicts are found in Fifth Schedule districts (tribal majority areas).

ADVERTISEMENT

Steps to Alleviate Suffering?

To alleviate the sufferings of people affected by mining, the MMDR Amendment Ordinance promulgated in 2015 provided for the creation of District Mineral Foundations – or DMFs – by state governments.

Under the scheme, a mining lease holder is supposed to pay 10-30 percent royalty to the DMFs, in addition to the royalty paid to the state.

The guidelines said that 60 percent of the DMF funds have to be utilised for ‘high priority sectors’ such as drinking water supply and education, while 40 percent is earmarked for ‘other priority sectors’ such as physical infrastructure, energy and cowshed development. The total collection of the DMFs stood at over Rs 45,000 crore in September 2020, The Financial Express reported.

The MMDR 2015 Ordinance stated, “The composition and functions of the DMF shall be such as may be prescribed by the state government.” Now, the proposed 2021 Bill reads, “Provided that the Central government may give directions regarding composition and utilisation of funds by the DMF.”

This takes away a state’s discretion in spending these funds for the benefit of the people and the areas affected – and strikes at the heart of cooperative federalism, something that seems to be losing its value more and more.

Even when the Bill was proposed in August 2020, states were given a window of just 10 days for feedback, Scroll reported.

RJD member Manoj Jha while referring to mining mafias said, “I have not seen a single Bill in the last three years which strengthens the foundation of cooperative federalism. I can see ‘Gangs of Wasseypur’ developing from these 13 reforms. There is no mention of people who live around these resources.”

ADVERTISEMENT

The Road to Privatisation

The new law removed the end-use restriction for participating in coal mining auctions and unwrapped the sector for private players to mine commercially.

According to PTI, Union Minister of Coal, Mines and Parliamentary Affairs Pralhad Joshi told the Lok Sabha on 15 March 2021, “The reform in the mining sector would generate 55 lakh direct and indirect jobs. To enhance mining activity, we will allow the private sector with enhanced technology in mineral exploration.”

Approximately 23 lakh people were employed in the Indian mining sector in 2011-12, The Economic Times reported. Joshi said that India has the same potential as South Africa and Australia, but the mining sector had remained under-explored.

“Currently, the contribution of the mining sector, putting all together, is around 1.75 percent of the GDP and we want to take it to 2.5 percent,” Joshi added.

“We want to bring private players into this because we have rich minerals like coal, gold, and silver, but we are not being able to bring it out. That’s why we are bringing these changes and trying to redefine exploration.”
Pralhad Joshi

Congress MP Digvijaya Singh said that the district where most minerals are found are also the homes of the poorest of people. He further said that since most mines are located in tribal areas, the Bill must include a provision for seeking consent of the Gram Sabha before the mining operations begin. He added that bringing in private players will be damaging to the labourers’ interests.

Privatisation also increases the risk of a monopoly and in an industry already ridden with corruption, the implementation of safeguards will become gruelling.

ADVERTISEMENT

Opposition to the Bill

Eleven out of 14 parties represented in the House requested that the Bill be referred to the Select Committee, according to a report by LiveLaw.

YSR Congress leader V Vijayasai Reddy called the Bill “anti-public sector”, while Telangana Rashtra Samithi MP K Keshava Rao asked the central government not to “repeat the mistake” it made with agricultural laws, PTI reported.

Joshi responded to these demands for scrutiny of the Bill and said, “The Bill was circulated to states and 10,500 comments were received.”

However, the Mineral Inheritors Rights Association had filed an application under the RTI Act questioning the ministry on how many comments had they received as feedback, how they were assessed and if any suggestions were implemented.

In response, the Ministry of Mines said it considered only those comments that were “committed for reforms”, indicating that criticisms and questions were disregarded.

CPI(M) member Jharna Das Baidya said, “Minerals are permanent assets of this country. We should ensure that they are properly utilised for the benefit of the country and not for the benefit of a few people.”

(With inputs from Scroll, Newsclick, The Financial Express, The Economic Times, LiveLaw and PTI.)

(The Quint is available on Telegram. For handpicked stories every day, subscribe to us on Telegram)

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