After going slow for many years, the Government is displaying urgency in a new mining law. The current law, the Mining and Minerals Development and Regulation Act, 1957, dates to a period when mining of important minerals was reserved for the public sector. Policy has diametrically changed since then, with the Government actively courting large multinational mining companies. Expansion of mining is considered a key to maintaining the GDP and export growth.

However, there is a major obstacle to these plans - the opposition of communities around the mining projects in the mainly tribal mineral belt stretching across Jharkhand, Chattisgarh, eastern Madhya Pradesh, Orissa and northern Andhra Pradesh. There is increasing attention drawn to the negative effects of mining. Vedanta's crude attempt at mining bauxite in the tribal-populated and thickly forested Niyamgiri hills has received bad press even in the West. This accounts for the urgency in drafting new legislation.

The Government has two major agendas. One is to align the law with the current 'investor friendly' mining policy. The other is to address the concerns of civil society, human rights groups, and even investors on the effects of mining on communities and the environment.

A reading of the draft mining regulation throws up a number of 'investor friendly' features - a transparent procedure for granting licenses, protection of investment made by companies in reconnaissance and prospecting, minimum size requirements that will favor large players, upper time limits for processing by the Government, a National Mining Tribunal to which appeals can be made against executive decisions, and so on. The draft also dwells on three important interests of communities affected by mining - environmental pollution, development of the areas surrounding mines and livelihood of the project-affected people.

Politically correct window dressing?

The draft speaks of the Government's responsibility to evolve a 'National sustainable development framework' for mining that will contain "guidelines enabling formulation of project-level practices for sustainable mining." The guidelines will include measures needed for

  • "ensuring minimal adverse impact on quality of life of the local communities",

  • "protecting interests of affected persons including host populations",

  • "creating new opportunities for socio-economic development including for sustainable livelihoods",

  • "reduction in waste generation and related waste management practices",

  • "minimizing and mitigating adverse environmental impacts particularly on surface as well as ground water (both in terms of its quality and availability as a resource), air, ambient noise and land",

  • "ensuring minimal ecological disturbance, in terms of bio-diversity, flora, fauna and habitat", and

  • "promoting restoration and reclamation activities so as to make optimal use of mined out land for the benefit of the local communities"

This list is itself an admission of the various kinds of damage caused by current mining practices, even those of public sector undertakings.

Take Korba district of Chhattisgarh, for example. Half the mineral-related revenues of Chattisgarh come from this one tribal-majority (51 per cent) district. Over 11 per cent of India's coal is mined here, most of it by a subsidiary of Coal India Limited. Taking advantage of the proximity to the mines, there are four thermal power plants located here as well, generating 3650 MW of electricity. Korba gives a lot to the country.

And what do the people of Korba get in return? The Chhattisgarh Human Development Report (2005) records that less than half the households in Korba district had electricity. In twenty per cent of the villages in the district, residents complained of respiratory diseases caused by fly ash from the thermal power plants. Huge open fly ash ponds dot the Korba landscape. The wind blows ash particles from NTPC's large pond, which is located at a height, into villages and fields lower down.

The impact of mining ranges from coal dust from coal handling plants covering the agricultural fields and affecting the yield adversely, to pollution of surface water leading to negative effects on the health of people and agriculture as well as degradation of forests. Korba holds a mirror to the ugly face of mining in India.

Take another example. National Mineral Development Corporation (NMDC), a public sector company, is India's largest iron ore producer. Over 80 per cent of its production is from the Bailadila hills (as the name suggests, the hills resemble the hump of an ox) in Dantewada district of Chhattisgarh. Seventy eight per cent of the population of Dantewada is tribal. Here in Chhattisgarh's tribal heartland, nature in all its forms - trees, waterfalls, and streams - is revered and venerated. The forests help sustain livelihoods as agriculture, where practical, is limited to a single crop.

The mining has resulted in the destruction of the forests, and people report that one third of the forest area of Dantewada is degraded. The groundwater level has fallen. The Bailadila hills show up as an ugly brown gash amidst the green jungles in satellite images. For people who strongly depend on forest produce, natural streams, and ground water for their livelihood, the devastating impact on their quality of life can only be imagined.

The substance of the measures in the draft mining legislation relating to 'sustainable development' is voluntary compliance to a model framework. There are no performance targets and therefore no penalties for non-performance.

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The Government has certainly captured the feedback provided by civil society in its outline of the issues that the 'sustainable development framework' (SDF) will grapple with. The draft regulation explains that mining companies will be held responsible for conforming to an approved mining plan. The Government will formulate rules for making mining plans and these will presumably encompass some of the measures prescribed in the SDF.

However, the emphasis in the mining plans as in the framework is on measures to be taken rather than results that must be achieved. If there are no limits set on maximum permissible pollution, there can be no accountability for polluting the environment, degrading the forest, or reducing the quality of life of the surrounding community as far as this mining regulation is concerned. Even the adoption of measures recommended in the SDF will be enforced only gradually. This view is confirmed in the recommendation of the draft report, Preparation of Sustainable Development Framework for the Indian Mining Sector developed by a consultant for the Ministry of Mines and released in September 2010.

Companies carry out philanthropic activities of different kinds and group them under the Corporate Social Responsibility (CSR) umbrella. It is common understanding that company managements accountable to share holders typically see CSR in the context of public relations and image building. The Government however seems to think that this is a means through which development can be brought to areas around mines. The draft mining legislation contains a clause requiring mining plans to have a CSR document "comprising of a scheme for annual expenditure by the lessee on socio-economic activities in and around the mine area for the benefit of the host populations in the panchayats adjoining the lease area and for enabling and facilitating self employment opportunities for such populations".

The amount to be spent for such activities is however not specified. A look at the income and expense statements of major mining companies shows the contrast between the actual expenditure on the ground and the publicity given to CSR and environmental preservation in the company websites and annual reports.

Sterlite Industries, a Vedanta group company, has a colorful 68-page 'sustainable development report' for 2008-09 that includes several of the measures contemplated in the SDF, including detailed reporting using what is claimed to be the world's most widely used sustainability reporting framework. The Madras High Court has just ordered its Thoothukudi (Tutucorin) smelter closed, stating that the entire plant site is severely polluted, that it emits noxious pollutants into the air, that its hazardous effluents have introduced arsenic, heavy metals and fluorides in ground water, and that it does not have the mandated green belt around the plant. Incidentally, Sterlite spent a little less that Rs.2 crores on CSR in a year when its net profit was Rs.1236 crores.

The substance of the measures in the draft mining legislation relating to 'sustainable development' is voluntary compliance to a model framework. There are no performance targets and therefore no penalties for non-performance. It seems that people affected by polluting mines and industry will have to fight their own battles - perhaps in the courts, as in the case of the people of Thoothukudi. The suspicion naturally arises that the mining regulation is being dressed up with politically correct phrases such as 'sustainable development' and 'corporate social responsibility', simply to disarm civil society critics and potential global investors.

Profits, royalty and annuity payments

The clause in the draft mining regulation that has aroused the maximum attention of the media is the proposal for an annuity to families affected by the mining operations to the extent of 26 per cent of annual profit after tax. The annuity is explained in these words: "the intention of providing compensation is to help ensure that families do not get classified as below poverty line category, for protecting the existing levels of monthly income earned by the affected family, and for improving incomes and quality of life of affected families."

This proposal, if serious, is worrying. Measures to protect existing levels of monthly income must be unconditional and part of the rehabilitation and resettlement package, and in place before mining commences. Again, improving the quality of life of the people is the Government's responsibility, and not something that can be outsourced. It is also in a sense a pre-condition for people to agree to sacrifice their land and undergo the trauma of displacement. How can all of this be contingent on the profits of the mining operation that will come sometime in the future?

There are several other issues. Mining happens typically in areas where people have little idea of the corporate world. Will they be able to track companies' profits and make sure that they get their entitlements? Will unscrupulous enterprises not be tempted to show lower profits from the mine? What will happen to those people who are not immediately affected, but suffer in the longer run?

Interestingly, the Federation of Indian Mineral Industries (FIMI) raises some of these very same issues. However, the core of their objection is that 26 per cent of profits is "too much". They propose instead that 10 per cent of the royalty (payment realized by the State as the 'owner' of the minerals being mined) payment to the State be set aside for this annuity.

A look at the royalty paid by major companies explains FIMIs' stand. The absurdly low royalty realized by the State (except in the case of coal) is in sharp contrast to the super profits made by miners.

Company Business Income Profit before tax Royalty and cess
CIL World's largest coal producer 45,797 5,744 5,367
NMDC India's largest iron ore producer 7,564 6,648 63
Sesa Goa India's largest iron ore exporter 4,996 2,631 14
NALCO Asia's largest integrated aluminium complex 5,617 1,927 39
Hindustan Zinc World's second largest integrated producer of zinc and lead 6,612 3,358 364

Income, profits and royalty payments (Rs. crores) of some of the
major mining companies in India in 2008-09

Governments are elected by people to take care of the public interest. While opening an area for mining, the Government must take the responsibility to see that people who are displaced are rehabilitated and settled with alternative livelihoods, that industry strictly adheres to environmental norms and that the Government itself brings about the infrastructure development that the people want - schools, vocational training, medical care, roads, safe water & sanitation - to the area. All of the above has a cost associated with it and this must be built in into the cost of exploitation of the minerals.

It is unacceptable for the Government to simply define the rules of the game and then leave it to the people - particularly when they are from the most disadvantaged communities - to stand up to and deal with multinational mining conglomerates.

If the new mining law is aimed at changing the attitude of communities towards mining, it may be missing the point entirely. The opposition to mines and mining is not a blind opposition to modernization, or an opportunistic posturing for getting a better deal. It is based on the dreadful experience of people with past projects. People left without land or livelihood, broken job promises, polluted earth, air, and water - all of this is public knowledge in the mineral belt. It is this knowledge that is behind the resolve of the communities against letting in mining into their homelands.

Taking tangible steps to improve the quality of life of communities around existing mines could be the best way to change the image of the mining industry.