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Centre Signals Over Rs 35,000 Crore Fund Cut for Polavaram Project, Affected Families Still Await Compensation

News Click | Prudhviraj Rupavath | Oct 24, 2020

As per government records, just less than 4% rehabilitation works have been completed in the last six years.

Hyderabad: The Union Finance Ministry has reportedly said that it will only sanction the project cost of Polavaram irrigation project at the 2013-14 price level which was Rs Rs 20,398.61 crore against the revised cost estimates of the Polavaram Project Authority (PPA) at the 2017-18 price level (Rs 55,548 crore) which was also approved by the Union Jal Shakthi Ministry. In other words, the finance ministry has signalled that there will be a fund cut to the tune of about Rs 35,150 crore.

While the YSRCP led Andhra Pradesh state government is yet to respond on the differences between the union ministries and the cut in project funding, activists are sensing a political conspiracy in the state which will not just delay the construction of the project but worsen the situation of lakhs of project oustees who are awaiting the government compensation for their villages, agriculture and forest lands acquired for the project.

Reportedly, Union Finance Minister Nirmala Sitaraman told Andhra Pradesh Finance Minister Buggana Rajendranath Reddy on Friday, October 23, that the Centre will reimburse only Rs 7,053.74 crore, which is pending as per the project cost at the 2013-14 price level.

“It seems like the central government is signalling that it would further delay the project, perhaps for the benefits of its party’s politics in the state,” said J Babjee, state secretary of Andhra Pradesh Vyavasaya Vruthidarula Union (APVVU), who has been organising the project affected families for claiming their legal rights. “But, the project affected families will be devastated as they have been waiting for compensation for years as they were not even provided with alternative livelihood sources,” he said.

In 2014, the Polavaram multipurpose irrigation project was declared as a national project during the bifurcation of erstwhile Andhra Pradesh into two states. The previous Telugu Desam Party government in the state took over the responsibility of the execution of the project as agreed by the Union government. The project cost was revised several times in the last 10 years both under the United Progressive Alliance and the National Democratic Alliance led governments.

In March, the Union Jal Shakti Ministry stated in Parliament that out of 1,05,601 Project Displaced Families of Polavaram project, rehabilitation and resettlement (R&R) works with respect to only 3,922 families has been completed.

Notably, 50% of the affected people are adivasis belonging to Koya and Kondareddy communities, and nearly 30% of the remaining belong to Scheduled Castes and Other Backward Castes.

After coming to power in 2019, YSRCP led government under Chief Minister Y S Jagan Mohan Reddy had called for reverse tendering of the Polavaram project and also enhanced the compensation to be provided for the project oustees.

In September last year, infrastructure major Megha Engineering and Infrastructure Limited (MEIL) acquired the contract for construction of the irrigation project including hydel power project for Rs 4,358 crore through a reverse tendering process called by the state government.

“In spite of being aware of the developments in the state concerning the project cost, the Centre has remained silent and is now reversing its own ministries approvals,” said Babjee, while expressing concerns about a “political conspiracy”.

As per the government records, less than 4% of the rehabilitation works have been completed in the last six years.

Further, in August 2019, the YSRCP government through a government order (GO) number 350 has enhanced rehabilitation entitlements for project affected families ensuring Rs 5 lakh more compensation and additional 25% benefits for SCs, STs living in the scheduled areas.

“Non implementation of the GO Ms No 350 will amount to breach of contract on the part of the state government,” said Babjee.

NewsClick has earlier reported that the recent floods this year in East and West Godavari districts have devastated thousands of families including those living in the Polavaram region.

The project affected families have also led numerous movements for compensation against over 51,000 acres of community forest land which was acquired from Tribes for Polavaram project.

District Mineral Fund collections bounce back from lockdown lows

Business Line | Oct 13, 2020

Rebound reflects recovery in mineral production across the country
Monthly collections in District Mineral Funds (DMF) have recovered significantly from their lockdown lows, with the gap between collections during 2020 and 2019 narrowing by September-end.

According to data shared by the Ministry of Mines, country-wide DMF collections last month stood at ₹718.46 crore, up from ₹417.29 crore in May, when the country was in the throes of the Covid-19 lockdown.

But compared to the ₹770.99 crore accrued in September 2019, the collections trailed by 6.81 per cent year-on-year.

Under the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY), mining companies have to make a contribution for the development of districts where mining activities take place, over and above their royalty payments.

These DMF collections, therefore, are directly linked to the country’s mineral output.

The amount is accumulated in funds controlled by individual District Mineral Foundations.

Arriving at the amount

For mining leases granted on or after January 12, 2015, an incremental amount equal to 10 per cent of the royalty needs to be parked by the mining companies towards DMF contributions.

For those granted before January 12, 2015, the contribution is equal to 30 per cent of the royalty.

Since the royalty is levied either on a per-tonne basis or ad valorem (linked to the sale price of minerals), across States, an increase in mineral output means higher royalties being collected. This also means more accruals in the DMF. With the lockdowns curtailing economic activity, mineral production also took a hit.

State to source DMF funds for infrastructure complex

The New Indian Express | Oct 05, 2020
Each complex will accommodate about 150 to 200 senior citizens/destitute, 100 to 200 children with physical disabilities and 50 children with intellectual disabilities.

BHUBANESWAR: Faced with delay in taking up projects resulting in cost overruns as well as funds crunch, Odisha Government has decided to go for construction of integrated infrastructure complex, including old age homes, with the funding support from District Mineral Foundation (DMF).

In 2016, Government had envisaged construction of old age homes and rehabilitation centres in all 30 districts as mandated under Maintenance and Welfare of Parents and Senior Citizens Act, 2007 to ensure a peaceful life to the neglected and destitute senior citizens as well as widows and mentally retarded children.

The five-year project started in 2017 was to be completed by 2022. Though work initially started in nine districts – Bhadrak, Khurda, Puri, Cuttack, Ganjam, Nabarangpur, Kandhamal, Sambalpur and Malkangiri and Rs 70 crore has been released out of the State budget so far, only around 20 per cent work is complete.
Initially the work was hampered due to land dispute, delay in land alienation and local agitations but the pandemic cast a shadow this year.

“In some districts, construction work started after land disputes were resolved and with help of police in June last year,” said an official.Meanwhile, it has been decided that the infrastructure complex in nine districts – Jharsuguda, Keonjhar, Koraput, Angul, Dhenkanal, Jajpur, Sundargarh, Rayagada and Mayurbhanj – will be funded by the DMF and construction of centres in rest 12 districts will be taken up from the State budget.

Accordingly, the total cost of the project has been revised to Rs 1,191.58 crore of which Rs 858.22 crore has been proposed to be met from State budget and balance Rs 333.36 crore from DMF. The infrastructure complex having old-age home, disabilities rehabilitation centre, facilities for vocational training, meditation and prayer hall and other supporting amenities will be built on 25 acre of land.

The Collectors of districts where the facility will be built with funds from DMF have been directed to furnish firm commitment for funding the project. NGO or agency which would be engaged in managing the integrated complexes will bear the maintenance cost out of the grants received by them.

“It has also been decided to deploy one officer along with five support staff to monitor the functioning of the complex. District administration will identify the NGO and in case, a corporate organisation agrees to fund major portion of the cost of the project, such organisations will be allowed to select the NGO to run it,” the official said.

Each complex will accommodate about 150 to 200 senior citizens/destitute, 100 to 200 children with physical disabilities and 50 children with intellectual disabilities.

Project plan
Infrastructure complex to be constructed in 30 districts
Total cost of the project has been revised to Rs 1,191.58 crore
Rs 858.22 crore to be met from State budget
Rs 333.36 crore from DMF

Problematic quest for tangible assets

The Indian Express | September 21, 2021

Proposal to use District Mineral Foundation funds for creating infrastructure goes against the purpose of such funds – they need to be used for welfare of mining-affected communities.

The Ministry of Mines has recently proposed “reforms” in the mining sector under the Atmanirbhar Bharat scheme to stimulate economic growth in the wake of the COVID-19 pandemic. A key proposition of the reform draft is to amend rules/guidelines for the use of District Mineral Foundation (DMF) funds to increase focus on creating “tangible assets”. The Ministry of Mines (MoM), it seems, wants to direct a large corpus of funds meant for mining-affected communities towards only creating infrastructure.

The proposal undermines the very law under which DMFs have been instituted. It also opens the floor for massive misdirection of funds. DMFs are non-profit trusts set up in all mining districts of the country under the Mines and Minerals (Development and Regulation) Amendment Act, 2015 to work for the “interest and benefit of people and areas affected by mining-related operations.” Mining companies contribute 10-30 per cent on the royalty amount that they pay to the government to DMF Trust in the district they are operating in. The idea behind the contribution is that local mining-affected communities, mostly tribal and among the poorest in the country, also have the right to benefit from natural resources extracted from where they live.

Currently, DMFs have been set-up in 572 districts of the country, with a cumulative accrual of more than Rs 40,000 crore so far as per MoM data. The corpus is only growing. To give a broad estimate, the big coal districts like Dhanbad, Ramgarh and Chatra in Jharkhand are likely to accrue Rs 250 crore each annually in DMF. So will many key coal and iron ore mining districts of Chhattisgarh and Odisha, with estimates ranging from Rs 100-400 crore annually for each.

The functioning of the DMF trusts and the fund use governed by states’ DMF Rules incorporate the mandates of a central guideline, Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) that specifies high priority areas of investments.

Why shouldn’t the DMF fund use be tied to tangible assets?
First, DMF is a huge corpus available at the district level, it is not tied to any specific scheme, is non-lapsable, and comes with a mandate to improve the socio-economic well-being of the mining-affected communities. This gives scope as well as provision for decentralised planning for the use of funds. The law also underscores this.

At this critical time, when the effort is to bring the economy back on its feet, this is an opportunity to invest in building income security through local livelihoods, adequate healthcare and nutrition access to the most vulnerable group of people in mining districts. These areas are also considered high priority under PMKKKY on which districts are mandated to spend at least 60 per cent of their DMF funds.

Second, over the last five years, the biggest problem with the DMF investments across states has been a blind focus on construction of infrastructure. Analysis of data from states and key mining districts until March 2020 shows that investments in the physical infrastructure sector through DMF have been the highest, ranging from 30-40 per cent of the total investment. This is for roads and bridges alone. Parse through the investments in healthcare, nutrition, education and you will find largely construction works.

This has happened because investments have so far been ad hoc and unplanned. By putting the focus on creation of tangible assets, MoM would only end up diluting the very idea behind the institution of DMFs, reinforcing poor investments, quick to show on paper, but not of real value to the people it is meant to serve.

This is not to say that infrastructure isn’t needed. But most districts have departmental funds for this. Also, there is existing infrastructure which lies under-resourced. Often, “creating infrastructure” is the easiest and quickest way to show spending but making the infrastructure useful to people is the biggest challenge. Similarly, investing in local livelihoods is more challenging because it requires planning and shows results only after a few years. This is where DMF must step in to address the gaps, invest in human resources and local livelihoods, make existing schemes better, and innovate to build socio-economic equity and resilience. The fact that it is untied and non-lapsable allows for time to think and plan wisely.

Third, by tying DMFs to tangible assets the MoM would undo some small but meaningful strides made by states and districts to improve investments. Over the last couple of years, there has been growing evidence from districts that proves that DMF funds can be used to improve critical human development indicators and improve incomes and livelihood of mining-affected communities through better ways than just creating infrastructure.

Here are some examples. In June, the iron-ore rich Keonjhar district in Odisha topped up the wages paid under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA) to match the state minimum wages. The district is using DMF funds to fill the gap and ensure more cash to the workers during the COVID-19 pandemic. Parity of minimum wages with MGNREGA wages has been a long-pending demand nationally.

The district recently also used the fund to integrate locally and agronomically produced millets into the Integrated Child Development Scheme (ICDS), a move to improve dietary diversity, nutrition indicators and also incomes of local self-health groups involved in food preparation.
The remote tribal and forested district of Bijapur in Chhattisgarh, set-up a fully functional district hospital by converging DMF funds with health department and other available funds. From a dilapidated building with a doctor or two, the district now has a hospital compliant with most Indian Public Health Standards (IPHS) norms.

DMF funds were particularly used to incentivise doctors and pay them competitive salaries. This had a cascading effect, with districts in Jharkhand and Odisha also improving local health access by hiring doctors and even paramedics. Kabirdham (Chhattisgarh) used it to train local Baiga tribe youth to teach in primary schools, creating local livelihood and addressing teaching shortage in one move. There are many such examples of convergence of funds, new and innovative initiatives, or just simply topping up the existing government schemes for better reach or impacts.

State governments are also gradually showing more inclination towards better investments. Chhattisgarh amended state DMF rules in September 2019 and gave representation to mining-affected people in the DMF decision-making body, asking for better focus on livelihoods, particularly forest-based livelihoods; Odisha amended its DMF rules in 2018 to improve focus on local livelihoods. The MoM itself put out a recommendation in 2019, calling for a focus on soft resources, long-term planning and better accountability of DMFs. The new reform measure focusing on creating tangible infrastructure would mean that these gains, which can be consolidated further, will be offset.

The overarching PMKKKY guideline needs strengthening. However, tying it to tangible assets is not the solution. Instead, the mandate must be for participatory local planning to address long-term needs of mining-affected areas and people. It must also ensure that districts are equipped with required expertise to aid their staff with this planning and implementation.

States must be given clarity on how to clearly and scientifically identify mining-affected people and delineate their respective mining-affected areas so that investments can be targeted towards them. Focus must be on achieving better human development indicators and building economic resilience among local communities.

Investment in infrastructure should strictly be a means to an end, and not an end in itself. Given the potential of DMFs, spending on infrastructure, in fact, must be brought down, monitored closely and tightly capped.

CBDT notifies rules on tax exemption for District Mineral Foundation Trusts

The Economic Times | Sep 10, 2020

The Central Board of Direct Taxes has exempted from tax the income of District Mineral Foundation Trusts arising from contribution by leaseholder to the foundation, interest on late payment, penalties, interest on the funds, saving bank accounts and that received from excess funds invested in term deposit.

The Board has specified conditions for availing the exemption. The Trust cannot engage in any commercial activity and activities and nature of the specified income shall remain unchanged throughout the financial years. The Trust has to file income tax returns and audit reports, certified by a chartered accountant.

“In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, ‘District Mineral Foundation Trust’ as specified in the schedule to this notification, constituted by Government in exercise of powers conferred under section 9(B) ofunchanged throughout the financial years. The Trust has to file income tax returns and audit reports, certified by a chartered accountant.

“In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, ‘District Mineral Foundation Trust’ as specified in the schedule to this notification, constituted by Government in exercise of powers conferred under section 9(B) of the Mines and Minerals (Development and Regulation) Amendment Act, 2015 (10 of 2015) as a ‘class of Authority’,” the Board said in a notification issued on September 10.

The exemption will apply for the assessment years 2018-2019, 2019-2020, 2020-2021, 2021-2022 and 2022-2023.

The District Mineral Foundation has been created in each district under the provisions of Mines and Minerals (Development and Regulation) (MMDR) Amendment Act, 2015 and falls under the purview of the Ministry of Mines. DMFs are funded by statutory contributions from holders of mining leases.

Industry bodies have previously sought subsuming all levies like royalty and contributions to the DMF into one tax like goods and services tax to reduce the tax burden on the mining industry. They have argued that the mining sector is going through a tough time due to falling commodity prices and demand contraction.

Federation of Indian Chambers of Commerce and Industry had previously underlined multiple challenges coupled with disruptions due to coronavirus lockdown, and sought deferment of royalty and contributions to DMF and National Mineral Exploration Trust (NMET) by six months.

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