Can the Executive Divert District Mineral Foundation Funds to Fight the Pandemic?

The Wire | Anandvardhan Yagnik |April 17, 2020

There was no reason to divert a special fund meant for people affected by mining unless the already existing state fiscal repositories had been exhausted and accounted for.

In wake of the unprecedented times and the COVID-19 pandemic, the Union finance minister, on March 26, while announcing several measures to combat the public health and the economic crisis in the nation, directed the states to use the District Mineral Foundation (DMF) funds to fight the pandemic.

The direction by the Centre to the states permitting the diversion of such special funds specifically meant for a targeted group of people who are affected by mining operations, again brings to fore the issues surrounding the legitimacy and propriety of such a move by the executive.

District Mineral Foundation (DMF) funds

In India, the mining industry is primarily regulated under the Mines and Minerals (Development and Regulation) Act, 1957. In the year 2015, by way of an amendment Act, the central legislation came to be amended bringing into effect far-reaching changes in the regulations governing the mining arena. One historical change was the creation of the District Mineral Foundation (DMFs). DMFs are essentially trusts to be set up in all the districts in every state affected by mining and are defined as institutions which will work ‘for the interest and benefit of persons and areas affected by mining-related operations’.

In our country, tribals, Adivasis and farmers have since long been known to bear the brunt of the adverse impacts of mining on their livelihoods which has resulted in degraded livelihoods and huge socio-economic, environmental and health hazards and costs. The realisation to contain such adversarial impact and rectify the historical injustice on these vulnerable group of people, led to the creation of DMF funds as a part of distributive justice and inclusive growth.

The DMF funds are collected at the district level and are essentially contributions from holders of mining leases. Pursuant to the 2015 amendment and creation of DMFs, the Union brought into effect the Pradhan Mantri Khanij Kshetra Kalyan Yojna (PMKKKY) in September 2015. The PMKKKY, inter alia, laid down the scheme qua the utilisation of the funds generated by the DMFs.

The DMFs generates fund by way of reserving 10% or 30%, as the case may be, of the royalty proceeds from the mining of minerals in the respective districts. From the total collections accrued under DMF, the mechanism provided envisages spending the same in the ratio of 60:40, 60% being for projects classified as high priority areas which include health care, education, sanitation, drinking water supply, women and child care, environment conservation, etc while the balance 40% being for projects classified as other priority areas which include construction of roads, railways, bridges etc.

Thus, in substance, the entire idea of creating a special fund like DMF is to provide for funds for the welfare of people affected by mining. With that background in mind, one has to look at the issue of how legitimate and proper is it that a special fund meant for a targeted group of people is diverted for purposes other than what it has been constituted for? More so, when there are other funds like the Prime Minister’s National Relief Fund, Chief Minister’s Relief Fund in respective states, the Contingency Fund, etc, available at the disposal of the state to meet with the pandemic.

Diversion of DMF Funds to fight the COVID-19 pandemic

Pursuant to the finance minister’s announcement directing the states to utilise the DMF Funds to fight against the pandemic, the Ministry of Mines issued a letter specifying that districts with at least one COVID-19 positive case could put to use the funds for medical equipment and infrastructure while in other cases the same could be put to use for procuring masks, sanitisers, for distribution of food to the marginal, etc. However, the amount of funds that can be utilised has been capped at 30% of the unused funds of DMFs. As per the data available on the website of Ministry of Mines, Government of India, as on January 2020, the total amount of unspent funds for all the district is around Rs 23,511 crores.

Hence 30% of the unspent funds would approximately translate to Rs 7053 crore. Talking about the state of Gujarat, as per the data available on the website of District Mineral Foundation, Government of Gujarat, which varies from the data available on MoM, as on March 2020, the total amount collected under DMF from 2016-17 to March 20-21 is Rs 9434 crore and the total amount of unspent funds is Rs 8775 crores and hence 30% of such unspent funds roughly translates into Rs 2632 crores which can be put to use to fight the pandemic.

No doubt, that the scheme provides for utilisation of DMF funds for high priority areas like healthcare and hence these could be put to use, more so in areas affected by mining because these are mainly rural and remote areas with no healthcare facilities and infrastructure and hence the local populace are more at risk of community transmission with even one positive case of COVID-19 in the area.

However, the same still does not justify the diversion of funds and making them available for use for emergency purposes – as in the present scenario – because that wasn’t the objective with which it was formed. It is a fund targeted with a specific purpose and for a specific group of people and region. Hence, mooting the whole idea for it being diverted to meet the emergency and giving directions qua the same without any participation and consent of the people for whom the fund has been created, in itself is an anomaly and deceiving of its objective.

However, the same is not unprecedented. With our form of governance, where, welfare, inclusive growth and distributive justice are best only terms of theoretical concepts, even previously special funds have been diverted for purposes other than which they had been constituted. The best example of this is that of the CAMPA funds. Like DMF funds, CAMPA funds too have been diverted for other flagship initiatives and policies and hence the Supreme Court has time and again pulled up the state governments for diverting the funds for purposes other than what they were meant for.

The funds from the social welfare schemes are for the benefit of the targeted population and not for the benefit of the government to shirk away its responsibility from providing basic amenities that it should as a state. Such people’s funds cannot be used in substitution of, for what state ought to incur expenditure from its own pocket. Otherwise, it defeats the whole purpose behind the creation of such funds.

With DMF funds, even after five years of its introduction, it still suffers dilatory implementation and sanctioning of projects overlooking needs of those affected, would now lose its very character if the diversion of funds is permitted to be carried on.

Diversion of special funds – legal?

The underlying premise behind the diversion is that the executive has always considered it to be its own fund. This needs to be dispelled. The DMF fund is a special fund which is meant for the welfare of the people affected by mining and is a people’s funds. However, this participative approach of the affected people or the targeted population for the welfare of whom the repository has been created have not been made part of the committees which look after the utilisation and implementation of DMF funds and hence their lies the genesis of the whole problem.

Each state frames its own rules with regard to the implementation of DMFs and pursuant to rules being notified, the committees have to be constituted. DMFs comprises of two committees, the composition of which is formulated by the state government.

One is the governing council and the other is the executive council. In Gujarat, the chairperson of the governing council is the prabhari mantri, who at present is MLA Bhupendrasinh Chudasama, while the chairperson of the executive council is the district collector of the respective district. These committees will determine which areas are mining-affected and thereafter allocate the fund, approve relevant projects and monitor their implementation.

However, the problem is the composition of the committees is such that it includes primarily bureaucrats and MLAs. There is no participation of people from the grassroots for whom the creation of the fund has been envisaged and hence from this undemocratic set up stems the superficial idea of it being government fund thereby leading to its diversion for purposes other than those specified.

To those who may ask that why should an emergent national interest when thousands of lives are required to be saved and protected, not be enough of a reason for diversion of DMF funds to meet with the national goal of containing the pandemic, the answer would be, that it is a structurally flawed understanding of fiscal responsibility of the state on their part.

Because, firstly, most districts have at their disposal, disaster relief funds, MPLADS funds granted to the member of parliament for the respective constituency, contributions from the funds granted to MLA for respective constituencies, etc. Apart from that, to meet with such emergent situations, there is the chief ministers relief fund for respective states, the contingency fund for respective states and the prime ministers relief fund. Moreover, even as the PM CARES Fund has been created which has received donations in high numbers takes care of the emergent national interest. So the legitimate question to be asked here is without having all these funds having been exhausted, why must the DMF Funds be used for fighting the COVID-19 pandemic?

Moreover, even otherwise, a special fund could have been diverted only upon completion of all developmental activities of a district. Prior to that, even an emergent situation does not justify its diversion. The special funds are to be utilised specifically for the purpose they have been created for and that can be ensured only when there is appropriate leadership at the district level and villagers, local populace, labourers working in mines, grassroots organisations, panchayats, etc. should be consulted and their participation be called for rather than thrusting all the decision making power in the hands of the political representatives and bureaucrats, because for them such special funds become an easy way out, to be used and diverted for all and other purposes and thereby abdicate their responsibility from providing for the same from the existing fiscal repositories of the state.

It is true that in times as unprecedented as now when we are faced with a pandemic, which calls for extraordinary measures to contain the coronavirus, all that can be done would be less, but that is no reason to divert a special fund meant for people affected by mining unless the already existing state fiscal repositories have been exhausted and accounted for because had that been the objective then special funds would stop to serve any purpose and every time the executive failed to perform its obligations and provide for what it ought to, then the best way out would be to casually divert the special funds.

The state of Odisha has expressed its willingness to use the DMF funds to fight COVID -19 and has rather requested the Centre to remove the cap of 30% usage of unspent funds. In spirit, as good as it may seem that a state is going out of its way to provide for its citizens but this could ensue a dangerous trend of diverting funds meant for welfare schemes for other purposes. However, at the same time, there are officials who discourage this trend.

Moreover, without any guidelines and accountability being in place, there is a higher risk of these funds being used for purposes that have nothing to do with mining-affected people and area. One of the factors which requires consideration is that there might be several projects which have been sanctioned for a district or area on the basis of the funds collected but since they have not been commenced the expenditure to be incurred might be lying with the trust. Hence overlooking the nitty gritties and without any law or guidelines in place to divert a portion of unspent funds could risk jeopardising several projects that may be in the pipeline.

Not only is the diversion of DMF funds illegitimate, improper, unjustifiable and a very unsustainable response of ruling dispensation’s for its failed governance but it has also rather increased the trust deficit of the farmers community and affected people who now fear that the DMF funds meant for their upliftment will be diverted by the government to meet its obligation which otherwise it should have from its own funds.

In Gujarat, several farmers affected by mining in Bhavnagar district have written to the state government and to the chairperson and members of the governing council and the executive council to not divert the DMF funds for any activities other than what has been envisaged under the PMKKY scheme and shall be utilized only for the targeted population for which it has been brought into existence.

Our history is replete with examples where special funds earmarked for special purpose have been diverted thereby time and again calling for legislative and judicial intervention to curb such diversions. However, the lesson has not been learnt and hence once again the step taken by the government runs the risk of becoming a dangerous precedent allowing ill-prepared authorities with a lack of foresight to use funds for specific functions as their personal kitties in the future and steps must be taken to avoid such occurrences.

Anandvardhan Yagnik is a practising lawyer at the Gujarat high court.

DMF: Implementation Status and Emerging Best Practices

CSE | April 10, 2020

District Mineral Foundation (DMF) Trusts have been developed across most mining districts in India over the past five years since the amendment of the Mines and Minerals (Development and Regulation) Act (MMDR) in 2015. These district-level bodies have the precise mandate to work in the interest of mining-affected people and areas. This is based on the fundamental idea that local communities have the right to benefit from natural resources extracted from their area.

With the mandated contribution from miners—equivalent to 30 per cent of the royalty amount for leases granted before 2015, and 10 per cent for leases granted after that—the total cumulative accrual in DMFs across the country is close to Rs 36,000 crore as in January 2020. Further, it is estimated that annually Rs 6,000 to Rs 7,000 crore will be accrued to DMF Trusts in the coming years. Given the corpus, DMFs have huge potential for poverty alleviation and improving human development indicators in India’s mining areas. As the fund is untied and non-lapsable, it can be used for addressing immediate needs and undertaking long-term improvement of mining-affected communities. DMFs can also strengthen local level governance as local communities have a key role in DMF decision-making, particularly in deciding the use of funds and in monitoring implementation of works and service delivery.

Utilising District Mineral Foundation funds to fight the COVID-19 crisis in India: Current and future opportunities

Brookings | April 06, 2020

In wake the of the growing COVID-19 crisis and the strain on healthcare resources, India’s finance minister Nirmala Sitharaman on March 26 announced that District Mineral Foundation (DMF) funds can be used by state governments to augment healthcare. This includes supplementing healthcare facilities, screening and testing requirements, and any other support that might be required.

The announcement that DMF funds will be a component of the government’s coronavirus relief package has generated a lot of discussion. In the light of this discussion, it is important to look at what the DMF funds were meant for and how they can be used effectively.

DMF was instituted exactly five years ago, in March 2015, through an amendment to India’s central mining law, the Mines and Minerals (Development and Regulation) Act (MMDR Amendment Act 2015). It has been conceptualised as a benefit-sharing mechanism with mining-affected communities, recognising them as partners in natural resource-led development. Set up as a non-profit trust in all mining districts of India, DMF comes with the precise objective to ‘work for the interest and benefit of people and areas affected by mining’, through a participatory process. It was also aligned with the important the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) scheme, that was launched in September 2015 to implement various developmental projects and welfare programmes in mining-affected areas with DMF funds.

The funds of DMF trust come through a contribution from mining companies operating in the district. Companies are required to pay 30% equivalent of the royalty amount for leases granted before 2015, and 10% for leases granted after that through auction mechanism. This must be paid for the lifetime of their operation. In just a five-year period, the cumulative accrual in DMF trusts is nearly Rs. 35,925 crores, as per available information with the Ministry of Mines. Government estimates suggest that about Rs. 6,000 crores are likely to be collected by DMFs annually. The DMF fund, therefore, is the largest non-tagged, non-plan money available for the benefit of some of India’s poorest and marginalised populations living in mining areas. The money is to be spent on improving human development indicators through investments in sectors such as healthcare, education, women and child development, improving sustainable livelihood and income opportunities in these areas and ensuring long-term security of the mining-affected communities. These have been identified as ‘high priority’ issues for DMF spending by the centre as well as state governments under the law.

Despite opportunities, the utilisation of funds in most states has been low. As per the Ministry of Mines, only Rs. 12,414 crores have been spent as of January 2020, which is only about 35% of the total amount.

On March 28, the Ministry of Mines issued directives on the proportion of DMF funds that can be used by state governments to fight the COVID-19 crisis. The amount has been capped at 30% of funds left unused with DMFs. Given the unspent amount is Rs 23,511 crore for all DMFs in the country, the maximum amount for COVID-19 roughly translates to more than Rs.7,000 crores. For top mining states like Odisha, the collective amount available is more than Rs. 2,000 crores (Table 1).

Table 1: Potential DMF funds to fight COVID-19 in some top mining states as per central government directives

State nameTotal DMF collection (Rs. cr)Unspent DMF fund(Rs. cr)Amount can be utilised for COVID-19(Rs. cr)
Odisha9,5016,7072,012
Jharkhand5,1812,772832
Chhattisgarh4,9801,622487
Rajasthan3,5142,766830
Madhya Pradesh2,8642,012604
Telangana2,7742,282685
Karnataka1,8421,522457
Maharashtra1,7281,120336

Source: Ministry of Mines, Government of India, DMF fund status up to January 2020.

While DMF administration comes under the aegis of districts and states, the Ministry of Mines has issued these directions under Section 20 of the MMDR Amendment Act. The letter issued by the Ministry of Mines to all state Chief Secretaries clarifies that such power has been exercised by the government in line with the emergent national interest to combat the COVID-19 pandemic.

The logistics of the DMF fund use are still being figured out by most states and districts as the situation is still unfolding. The centre’s directions broadly specify that DMF funds should be used for COVID-19 in those districts where at least one COVID-19 positive patient has been detected. As per official sources from states such as Chhattisgarh and Tamil Nadu, the state governments may issue some directions to districts in the coming days depending on the local situation.

Opportunities to use DMF funds effectively

DMF funds can be utilised to scale up healthcare intervention across states, particularly at the local level. While the disease clusters are still concentrated in the cities and major town centres, the reverse migration of labourers to rural areas gives reason for concern of community transmission. Given the poor status of healthcare resources in most of rural and remote areas, taking early measures is critical.

For example, most of these districts have a severe shortfall of primary healthcare services such as the primary healthcare centres (PHCs) or community health centres (CHCs). As per district health officials, in most areas, these facilities already operate at twice their capacities [i]. Additionally, there is a serious issue with access to these healthcare facilities. For example, according to the Brookings India Health Monitor (2018 estimates), in Odisha’s Keonjhar district, only 4% villages have a PHC within 5 kilometer (km) radius, and only 3% villages have access to a CHC within 10 km radius. Similarly, in Jharkhand’s West Singhbhum district, only about 14% of villages have PHCs within a 5 km radius.

Given this, there have been clear concerns about how DMF funds were being spent in the mining areas. Between 2016-2018, the trends were problematic. Barring few, in most states and districts, a primary focus of expenditure has been on physical infrastructure, including major roads. Expenditure in ‘high priority’ sectors such as healthcare, women and child development, livelihood support, has been grossly sub-optimal as compared to the need. For example, in Jharkhand, until 2018, healthcare sector accounted for only 0.22% of the total spending, in Chhattisgarh 7.8% and in Odisha about 15% (largely owing to one major hospital in Keonjhar) [ii].

However, over the past year there has been some revised focus on healthcare resources. As per information from officials, media sources and advertisements, some districts are trying to bridge the gap in healthcare staff and service delivery. These include districts like Keonjhar, Sundargarh, West Singhbhum, Chatra, Bijapur, Dantewada etc. A primary measure has been hiring doctors as well as trying to reach out to remote areas through mobile health service delivery systems such as mobile medical units, motorbike ambulances etc.

The DMF funds now can be crucial for these districts. The money can be used to procure testing equipment, personal protective equipment (PPE) for healthcare workers, train frontline workers and increase capacity of ASHA (accredited social health activists) workers in these areas, engage paramedical staff on contractual basis, pay volunteers from local non-profits and village groups to improve community outreach on COVID-19 do’s and don’ts.

Keonjhar district has just sanctioned Rs. 7.5 crores towards such efforts. As per district sources, this will be used for upgradation of primary healthcare facilities in the district, establishment of isolation facilities, procure PPEs, train healthcare staff to combat COVID-19 and hire additional resources as required [iii].

The districts and states also should take this as a lesson to improve the healthcare situation, particularly in the rural areas. While the preparedness for emergencies is important, the overall strengthening of rural healthcare is critical to provide sustained care to the country’s poorest and most marginalised citizens. Healthcare must be a major component of DMF plan in the coming years.

In the coming days, the districts may also consider providing direct cash transfers to poor families in these areas, particularly to labourers whose livelihood has been affected by the measures to contain the disease. The overall DMF fund available with states and districts provides substantial scope. However, a proper system to do this needs some consideration. There are emerging concerns about direct benefit transfer (DBT), as it depends on the Jan Dhan-Aadhaar-Mobile (JAM) architecture, which allows direct transfer of government-sanctioned welfare funds to bank accounts of the beneficiaries. However, many people in rural areas, particularly migrant laborers, do not have bank accounts.

As the COVID-19 situation keeps evolving, proper mechanisms of utilisation of relief funds to tackle the health crisis, as well as to provide economic support to some of the poorest will be critical. The fight, as many experts are predicting, is a long haul.

Miners cry foul as 70% of District Mineral Fund remain idle

Business Line | Nov 03, 2019

While the Central government is struggling to make its ends meet with falling revenues and rising expenses, the mineral rich states are fighting a problem of plenty.

The 21 mineral rich states in country has managed to spend only 30 per cent of the money collected under District Mineral Fund (DMF) ever since the states started collecting a portion of the value of mineral mined as royalty in last five years. As of August, these states together had accumulated Rs 31,831 crore in DMF but spent only Rs 9,555 crore in districts around the mining area, as per government data.

Mining lease

As per the Mines and Minerals Development & Regulation Act, 2015, companies that have acquired mining lease through the auction route have to pay 10 per cent of the value of mineral as royalty to the state government which in turn will set up a DMF. Older mines that are allocated by the government outside the purview of auction chip in 30 per cent to DMF. The leases of these mines will expire and auctioned next March.

The mineral producing states have collected Rs 13,584 crore as DMF from sale of coal and lignite while contribution from other major minerals and minor minerals were Rs 15,241 crore and Rs 3,006 crore, respectively. Of the 583 districts that were suppose to set up DMF, only 557 have formed the fund.

Of the 133,214 projects identified, 23,804 projects are yet to start while 6,538 projects have been cancelled. In all 45,523 have been completed and 57,349 projects are ongoing. With Rs 8,253 crore, Odisha has the highest DMF corpus. Out of 12,664 projects sanctioned, only 5,438 projects have been competed, 4,130 are on-going, and 3,096 are yet to start. However, Odisha has not scrapped a single project.

DMF corpus

Similarly, Jharkhand, the second highest contributor in DMF, with about Rs 4,585 crore, has 16,519 projects sanctioned but not a single project has been completed. With a contribution of Rs 4,435 crore, Chhattisgarh was the third largest state in DMF mop up. It has the highest number of sanctioned projects at 31,657 and has completed 20,025 projects and scrapped 1,448 projects.

Others such as Rajasthan, Telangana and Madhya Pradesh also rank among states with top DMF corpus. RK Sharma, Secretary General, Federation of Indian Mineral Industry said while the numbers speak for the themselves, the progress of projects has been pathetically slow and communities believe that mining companies are not doing enough.

Government should form a body of Indian mining companies and state governments to make a concrete action plan and spend DMF funds gainfully, said Sharma who heads the apex body of miners.

Funds Meant for the Dying Used for Development?

News Central | Rosamma Thomas | Sep 19, 2019
Rs 2248 crore accumulated DMF funds in Rajasthan, but utilisation mostly for roads, construction.

The District Mineral Foundation Trusts were formed with the aim of putting in place funds and processes that would aid those affected by mining and help in restoration of lands laid waste by mines. The Rajasthan government notified the rules of these trusts in 2016 and set up district foundations in each of its 33 districts. The website of the state DMF shows that Rs 2248.31 crore has been collected by the DMFs in the state; this is drawn from the royalty that the mines pay to the government.

However, a perusal of the utilisation of these funds in the different districts shows that the bulk of the money is being used for construction – for building healthcare facilities or laying roads. In Bhilwara district, for instance, where a large number of workers are affected by silicosis, the incurable lung disease that afflicts mine workers after silica dust lodges in their lungs, 34 per cent of the funds were used for developing physical infrastructure and 25 per cent for provision of drinking water.

The Comptroller and Auditor General had earlier pointed to how the collections meant for the DMF were not being used judiciously and underlined the need to create a separate account sub-head for DMFT contributions. As of March 2018, CAG found an accumulated Rs 498 crore lying idle in a non-interest bearing personal deposit of the Department of Mining and Geology, leaving district trusts deprived, Down To Earth magazine reported.

Rana Sengupta of the Mine Labourers Protection Campaign, Jodhpur, says, “Physical infrastructure and drinking water provision should be made from the general budget, ideally. The DMF funds should be dedicated to the welfare of those suffering because of mining operations and for restoration of the land.”

At a recent meeting in the state capital, Dr Kamlesh Sarkar of the National Institute of Occupational Health, Ahmedabad, explained that he had found a scientific way in which silicosis could be detected early, by tracking the club cell protein in serum. In a healthy adult, the reading is 16.7 nanogram per millilitre, and as the disease progresses this count drops. The doctor explained that if the disease is caught early, deterioration of the lungs can be prevented by ensuring that the patient is no longer exposed to the dust. Dr Sarkar needed Rs 1.23 crore to confirm his findings through a five-year study, but had not been able to manage the funds.

In July this year, the Centre approved the merger of the National Institute of Miners Health, Nagpur, with the National Institute of Occupational Health, Ahmedabad. Activist Rana Sengupta says, “There is a more urgent need now for a special institute dedicated to the study of silicosis. The government of Rajasthan has put in place measures for compensating patients diagnosed with the condition, but we need now to ensure proper prevention. And for that, it would be ideal if a centre for silicosis were set up by the state government. It could come up either within the Desert Medicine Research Centre or All India Institute of Medical Sciences, both of which are in Jodhpur. Such a centre would also create knowledge that would be useful for patients suffering from the disease in other states.”

At a recent meeting with CM Ashok Gehlot, activists urged the chief minister to set up a research centre dedicated to silicosis at the state level even if support was not forthcoming from the Centre.

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