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)
Madhya Pradesh2,8642,012604

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.

Government has taken steps to ensure central funds reach poor: Narendra Modi

Money Control | April 16, 2019

PM Modi’s statement was a counter to the recent claim by Odisha Chief Minister Naveen Patnaik that the Centre has no sympathy for the farmers of the state.

Prime Minister Narendra Modi on April 16 said his government has taken measures to weed out Congress-aided middlemen to ensure that the entire central funds percolate down to the poor. He also announced a slew of measures for the welfare of farmers and fishermen, if the BJP was voted to power.

Mounting a blistering attack on the Congress, Modi accused it of being a silent spectator to the loot of public money besides being embroiled in multiple controversies and scams before the BJP-led government put brakes on these corrupt practices. “During the Congress era, only 15 paise of a rupee would reach the poor and the rest was swindled by unscrupulous elements. No one bothered to stop it. Now, we have ensured that central funds reach the poor,” Modi said, addressing a rally here in western Odisha. Read more

K’taka mining dependents stage protest at Jantar Mantar

Deccan Herald | April 16, 2019

Mining dependents of Karnataka on Tuesday staged a protest here at Jantar Mantar to press for non-discriminatory practices in iron ore trade in the state and sought immediate action by the Centre in “rescuing their livelihoods from prejudiced policies” prevailing in the state.

“Around 600 people of Karnataka Gani Avalambithara Vedike (KGAV), consisting of iron ore mining dependants from Bellary, Hospet, Chitradurga districts and surrounding mining belt gathered for a protest at Jantar Mantar in New Delhi today,” KGAV, which represents mining dependents, said in a statement. Read more

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