May 16, 2010

Rape and Run: Mining industry must share 50 per cent profits with locals

Sometime back I accompanied Mr M P Prakash, the former deputy chief minister of Karnataka, on a visit to Hospet in Bellary district, the epicentre of environmental devastation accruing from heavy mining activity. It is a ghastly sight, and I hope one day the Chief Justice of India travels to see the permanent scar that has literally been drilled by the Reddy brothers and the tribe.

The Supreme Court had recently allowed Reddy brothers to restart operations.

Mining in Bellary

Travel to Orissa and Chhatisgarh, legal and illegal mining goes on unchecked for the control of India's massive natural wealth. So much so that the Central as well as the State governments are even reluctant to tell the nation as to how many MoUs have been signed, and are operating. Add to it, the massive land acquisitions in the name of industrial development, the destruction of the fertile landscape rightly earns the epithet Rape and Run.

Since the mining areas fall in the tribal belts, the anger built over hundreds of years of exploitation (mining is the latest aggression), is being expressed through the rise of naxalism. As a report in The Hindustan Times (May 16, 2010) tells us, Rs 1,28,000-crore was the total output of the country's mining industry in 2009-10. This is of course the official figure, we all know the extent of illegal mining goes much beyond. The royalty that the States earned was a mere Rs 2,000 crore, which doubled last year because of the ad valorem duty introduced two years ago.

The people who live in the areas containing the mineral wealth have been further pauperized. The royalty that the State's earn, which in any case is pittance, has never benefitted them. I am told the new Mines and Minerals Bill provides for 26 per cent of profits from mining to be given to locals and also there is a provision to make them stakeholders. This is certainly better than before, but I would have thought that the Anwarul Hooda committee, which made these suggestions, should have provided for 50 per cent profits to be shared with locals.

I am aware that the mining industry will not take it lying down. They will oppose it tooth and nail, and with 300 crorepatis in parliament, their fight becomes a little easier.

When it comes to charging royalty, as the seed industry does, the sky is the limit. But when the mining companies are asked to pay royalty, they avoid and dither. While the royalty from mining was barely Rs 19 a tonne of high-grade iron that sold for thousands of rupees, the seed industry initially charged a whopping 300 per cent royalty (called as 'technology fee') for Bt cotton seeds. Either way, the industry knows how to extract its pound of flesh.

Anyway, mining is a subject on which many a bloody battles have been (and continue to be) fought. I draw your attention to The Hindustan Times article below:

Mine or Yours?

The Hindustan Times, May 16, 2010

Loot and Run: The battle rages for the control of India's massive mineral wealth. We take stock of the strategies of its key players: the politicians, mining cos, and the Maoists

The earth seems to have opened up under the government’s feet. One of the oldest industries known to mankind — mining — has suddenly emerged as the deepest pit of scams in India. There are allegations cropping up from almost every mining state, and the figures allegedly plundered add up to the biggest scam in the country.

The current crop of scams started hitting the headlines last year. Former chief minister of Jharkhand, Madhu Koda, was accused of stashing away Rs 4,000 crore garnered through mining scams.

From Orissa, Rabi Das, convenor of civil society group Jan Sammelani, petitioned the Supreme Court that minerals such as iron ore, coal and manganese worth more than Rs 7,000 crore were being smuggled out of the state every year. On March 17, Karnataka’s leader of opposition, Siddaramaiah, alleged illegal mining losses to the state totalling Rs 5,000 crore.

The Union ministry of mines put a value of a mere Rs 64 crore as the amount lost to illegal mining in the first half of the previous financial year (April-September 2009).

But the total allegations made in court or on the floors of state assemblies tot up to more than Rs 20,000 crore — higher than the allocation proposed in the current Union budget for the country’s road transport system.

How does an industry that contributes less than 2 per cent of the national economic output account for its largest scam?

The blame game

The answer lies in outdated policies and the fact that mining remains one of the principal ‘real estates’ that government can hand out. The dissimilarities with other similar industries — telecom and oil and gas, where the government gives out spectrum and prospecting land — are probably because of the first reason.

Telecom minister A Raja has been accused of ‘forgoing’ Rs 10,000-100,000 crore while handing out spectrum. The mud-slingers said he could have priced it differently. But if a similar calculation is done for mining, by the government’s own admission, the ‘loss’ would have come to Rs 2,000 crore a year.

Here’s how the figure can be calculated. The amount the mining states made last year from the ad valorem duty of 10 per cent on some minerals introduced in August 2009 was Rs 4,000 crore. Before that, the outdated royalty system — under which a miner paid a fixed royalty, such as Rs 19 a tonne of high-grade iron ore that has been selling for thousands of rupees — fetched half the amount for the states annually.

Still, it’s a fraction of the money allegedly lost to illegal mining.

Stateside view

The problem is intense in Goa, a microcosm of the problems besetting an industry that’s governed by states.

Read the full article at:

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