Category: News

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.

Whose minerals are they anyway?

Mongabay | Sep 10, 2020

Over the past few months, the government of India has been focusing on the mining sector to revive the country’s economy but it is feared that it could mean a troubled time ahead for communities involved and environment.
However, the major question is whether such a push is in line with the National Mineral Policy 2019 of India which talks about the concept of inter-generational equity as far as mineral wealth is concerned.
The organisations involved with the communities that are impacted by the mining believe that protection and welfare of tribal people and poor are rarely the focus area of mining plans which are heavily focused on higher revenues.
To tackle the already slowing economy, whose condition further deteriorated after COVID-19 pandemic, the Indian government is pushing for more mining. But is this push for more revenue in line with the principles in India’s mining policy that talk about sustainable mining and minerals being a part of shared inheritance with future generations?

Over the past few months, Prime Minister Narendra Modi and various other ministers in his government have emphasised that the push for mining including coal will result in additional investments and revenue worth hundreds of billions of rupees. The government has already unveiled more reforms in the mining sector.

Meanwhile, communities that are already struggling with land conflicts, pollution issues (water, air and soil), health impacts, continue suffering even as new areas that will be opened for mining come with a potential threat to the local ecology, including biodiversity, forests and the communities.

Odisha-based tribal rights leader Deme Oram said that communities whose areas have been destroyed due to the greed of mining companies and the state authorities are helpless. “There are many Supreme Court orders which state that mining in scheduled areas (as per the Indian constitution), should be done through cooperatives that have tribal communities as members. But it is rarely done and such orders are openly violated by states to favour corporates and money bags,” Oram told Mongabay-India. He is the member of Mines, Mineral and People (MMP), an alliance spread across 18 states with more than 100 grassroots groups and about 20 diverse support organisations.

The concept of minerals being part of the shared inheritance is mentioned in the Indian government’s National Mineral Policy 2019. It noted that “natural resources, including minerals, are a shared inheritance where the State is a trustee on behalf of the people and therefore it is imperative that allocation of mineral resources is done in a fair and transparent manner to ensure equitable distribution of mineral wealth to sub-serve the common good.”

The policy had stressed that mining needs to be carried out in an environmentally sustainable manner keeping stakeholders’ participation, and devolution of benefits to the mining-affected persons with the overall objective of maintaining a high level of trust between all stakeholders.

But the on ground situation shows that rarely happens as conflicts related to land, health and ecology in the mining sector are found in abundance. Once the mining starts, the life of the communities in and around mining areas takes a turn for the worse and even when the mining is over its after-effects have shown to continue to impact people. Increasingly, the concept of just transition is being discussed which deals with the discussion around sustainable mining and the impact of operational mines on people and ecology.

“Even if tribal communities form a cooperative, or they get together and start mining there is no one who will buy products from them and let them flourish. Moreover, when mining is done by corporates the poor people are exploited and the local ecology (air, water and soil) is completely destroyed. People are left to suffer and they have nowhere to go. The state authorities whose prime responsibility is to protect the rights of people are working for corporates. Even the District Mineral Foundation funds, whose control should have been with communities, is being used by authorities for work like roads etc which should have been done for those people irrespective of the DMF,” said Oram, who focuses on land rights of the tribal people and governance in Fifth Schedule areas. Fifth Schedule areas are tribal-dominated areas identified under the Indian Constitution where special care is taken for rights and welfare of tribal communities.

For instance, he said, around 20 years ago, when sponge iron plants started in Odisha, people were told that it would bring development. “The only thing those plants have done is to destroy the lives of people and air, water and soil. In such a scenario, communities have no place to think about who owns the mineral wealth and how that should be preserved for future generations. They are busy saving their present and trying to earn their livelihood,” said Oram.

Is sustainable mining the keyword?
India’s National Mineral Policy 2019 had also emphasised that mining operations shall not ordinarily be taken up in identified ecologically fragile and biologically rich areas. It had noted that the government shall identify such areas that are critically fragile in terms of ecology and declare as ‘in-violate areas’ or ‘no-go areas’ out of bounds for mining and with a view to reducing pollution, carbon footprint and operational costs, use of renewable sources of energy at mining sites will be encouraged through appropriate incentives.

It had even suggested an inter-ministerial mechanism to decide the limits on the extent of mining activities that should be permitted including a detailed study for assessing the ceiling of annual excavation of minerals, considering the availability of mineral resources, the carrying capacity of the region, and the macro-environmental impact on the region while also “keeping in mind the principles of sustainable development and intergenerational equity and all other relevant factors.”

Rahul Basu, who is the research director at Goa Foundation, a Goa-based environmental group, said that it is important for governments to recognise that since natural resources, including minerals, are common wealth held in trust, not proprietary assets of the government in power, all the duties of a trustee apply to the government, including the duty to protect the corpus of the trust, prevent theft, loss or waste, and a duty to treat beneficiaries equally.

On the government’s efforts to boost the mining sector, Basu said it is “absurd to think increasing mining will lead to an economic revival.”

“Average daily employment in non-fuel major mineral mines is only around 100,000, around 0.25 percent of India’s workforce. And mining is steadily getting more mechanised. Further, if we see minerals as inherited wealth, surely it is better to purchase the minerals we need from others and keep our own minerals safely for our future generation,” Basu told Mongabay-India.

He explained that for most minerals, the existing mines in the country have sufficient reserves to supply industry and thus it would be preferable from community rights and environmental standpoint to expand existing mines rather than open new mines.

“However, the government seems focused on giving away large tracts for new extraction projects at exactly the worst time to be selling wealth. Even with the existing mines, there are many violations of community rights and environmental laws. For example, all mines in Goa were found to be violating one or more law. Why is it that the Indian mining industry is simply unwilling to follow the law? It would be better for the government to first do an intensive study of all existing mines to see if they are following the law, especially in connection with community rights and the environment,” argued Basu.

He further remarked that in cases where any violations are found, the local communities should be properly compensated, the environmental damage restored, the offending lessees blacklisted, and the leases auctioned off.

But what irks the communities is that the promised development due to mining rarely reaches them.

Sanjay Namdeo, who is the head of the Communist Party of India (CPI) in the Singrauli district, stressed mineral-rich Singrauli area, which is dominated by tribal people, was a land of abundant water, forests and agriculture but has now been ravaged due to human greed.

“The experience of extensive mining in this region over the past few decades has shown everything that is bad with the mining industry. Ideally, the communities should have full right over the water, forests and land as they nurture it over the years. But governments fail to do so. For example, in Singrauli, the government failed to ensure that people get the benefit. Instead, it is the industrialists who get all the benefits. Secondly, mining should have improved the lives of people involved or impacted by the mining sector including those whose livelihoods were based on the land where mining is taking place. But this never happened and instead, their lives have been completely destroyed. The mining profits should have been shared with the communities but that never happens,” Namdeo told Mongabay-India.

Minerals are a shared inheritance
Mining is an important sector in India’s economy and results in raw material for many other industries in the country. Right now, India now produces 95 minerals and is among the top producers of coal and iron ore globally. There are thousands of mining leases across the country. Over the past few months, the central government has been focusing on pushing the mining sector to boost the economy. For instance, it first allowed commercial coal mining to increase coal production and then, in August 2020, proposed reforms in the mining sector.

But the question is whether such reforms will be able to improve the lives of the communities involved.

Saswati Swetlena of the Mineral Inheritors Rights Association (MIRA), a network of civil society groups, said mineral resources are a shared inheritance and are best safeguarded by the local communities for the future generations.

“The local communities particularly, women, must be recognised as the custodians of all forms of natural resources and its governance as their fundamental right to ensure environmental justice. In the name of ease of business and public purpose, the state has been violating every legal provision meant to protect the rights of the communities. How does any mineral extraction make sense when it evicts and dispossesses millions from their life and livelihoods for the benefit of a few corporates? Is the state trust-worthy?” Swetlena questioned.

Rahul Basu of Goa Foundation said we need to ensure our children and future generations inherit at least as much as we did and we must ensure we capture the full value of our mineral wealth, save the entire proceeds for future generations, and distribute the income from the new investments equally to all as a citizens dividend, a right of ownership.

“At present, governments wrongly treat royalties as revenue, not a capital receipt, and merrily spend it, cheating our children and future generations of their rightful inheritance. There are a number of other inheritances that are depleted by mining, including the environment, the social fabric of the local community, the employment and incomes associated and the right to use the ore for useful things. Each of these inheritances is also subject to the inter-generational equity principle, and mining must be planned in such a way to ensure we avoid, restore or offset any damage to these inheritances, and if that is not possible, capture the full value and save it for future generations. This is only ethical, moral, fair, just and right,” Basu remarked.

Left Protests Against Andhra Govt’s Gross Negligence of People Affected in Godavari Floods

News Click | Prudhviraj Rupavath  | Sep 02, 2020

Only 3,922 out of the one lakh families displaced by the Polavaram Project have been rehabilitated until now, and the rest have been heavily affected by the ongoing floods.

Hyderabad: Demanding compensation for the thousands of families affected in the River Godavari floods in August, and rehabilitation for the Polavaram project affected families, Communist party of India (Marxist), [CPI(M)] and its affiliated organisations held protest demonstrations across several mandals in West and East Godavari districts in Andhra Pradesh on Wednesday, September 2.

Reportedly, the Godavari witnessed nearly 22 lakh cusecs per day flood flow in the third week of August. Left party leaders who have recently visited the flood affected regions told NewsClick that the floods have resulted in the evacuation of about 17,000 families from 100 villages in Godavari districts.

“The gross negligence of the state government in failing to provide adequate rescue and rehabilitation arrangements in the flood prone area has pushed thousands of families in agency areas to shift to hill tops to take shelter,” said J Babjee, state secretary of Andhra Pradesh Vyavasaya Vruthidarula Union (APVVU), a trade union of agricultural workers, marginal farmers and fisher people in the state.

“Hundreds of houses have been submerged in the floods, road connectivity to numerous mandals has been damaged, power supply has been affected, agriculture crops have been damaged, and even the government’s ration supply has not reached many villages, leaving many families in dire situation. But the government has announced just Rs 2,000 per family as compensation, which reveals their negligence,” said Babjee.

CPI(M) state secretary P Madhu visited the affected villages on Wednesday and gave a protest call, demanding compensation and rehabilitation across revenue offices in the two districts on September 5.

“Most families have run out of rice, fuel and groceries, etc., supplied by the authorities,” said A Ravi of West Godavari district, who participated in the protest.

Polavaram project affected families who have been awaiting rehabilitation have also been severely affected in the recent floods. “Evidently, the governments are interested in completing the project but not in ensuring proper rehabilitation to the affected families,” said P Madhu.

The Polavaram project affected families have been demanding fair compensation as per the provisions under Land Acquisition Act, 2013 for years.

The project was granted national status (full cost to be borne by the Union government) by the UPA II government through the AP Reorganization Act, 2014. After the YSRCP led government under Chief Minister Y. S. Jaganmohan Reddy came to power, the authorities called for new tenders for project work under reverse tendering process, and subsequently Megha Engineering and Infrastructure Limited (MEIL) grabbed the project.

In February, 2019, the Technical Advisory Committee of the Union Jal Shakti Ministry gave clearance for Rs 55,548 crore revised cost estimates of the project.

As per the government records, so far, only 3.7% of the rehabilitation works have been completed.

In March, Union Jal Shakti ministry stated in the parliament that out of 1,05,601 Project Displaced Families of Polavaram project, Rehabilitation & Resettlement (R&R) works in respect of only 3922 families has been completed.

Observers argue that 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.

“The resettlement colonies being constructed for project affected families are lacking basic amenities and facilities which are to be provided as per the land acquisition Act,” said Babjee. He added that hundreds of Adivasis who were having community land rights titles under Forest Rights Act were not compensated.

Misuse of Mineral Foundation funds: HC asks Goa to respond in two weeks

The Hindustan Times | Aug 26, 2020

The petition has alleged that the Goa government has neglected the demands by those affected by mining and has instead diverted the funds for Covid-19 management

The Bombay high court (HC) at Goa has directed the Pramod Sawant-led government to respond within two weeks to a petition alleging misuse of funds by the two District Mineral Foundations (DMFs) in the coastal state.

The petition was filed by Sudesh Narayan Gaonkar and Nilesh Harishchandra Velip, who are residents of two mining-affected villages such as Velguem and Collem, respectively. The petitioners were supported by the Goa Foundation, a non-governmental organisation (NGO) known for its environmental activism.

The petition has alleged that the Goa government has neglected the demands by those affected by mining for long and has instead diverted the funds for the management of the raging coronavirus disease (Covid-19) outbreak in the state. The move is outside the scope of the DMFs, the plea added.

The petition has challenged the legal basis of the circular that has been issued by the state ministry of mines, which have recommended the diversion of the DMFs’ funds.

“There is a proposal to divert up to 30% of DMFs’ funds for Covid-19 relief measures in the state, while glossing over the primary objective of the reason behind the setting up of the mechanism. The persons for whom DMFs’ funds have been set aside by Parliament have suffered the ill-effects of mining activities for over two decades, as compared to the Covid-19 epidemic that was first reported in Goa less than six months ago,” alleged Claude Alvares, director, Goa Foundation.

Various mining-affected villages have filed proposals for improvement of their village assets, including water resources and agricultural fields, and have sought funds from the DMFs’ kitty to alleviate their woes.

However, the proposals have allegedly fallen on the state authorities’ deaf ears .

For instance, over 40 proposals have been received by a DMF alone for financial support, including for rehabilitation of village assets such irrigation sources and paddy fields.

“The two DMFs have abandoned their statutory responsibilities and the applications are still pending with the state government,” the petition alleged.

In 2018, the HC had lashed out at the Goa government for its failure to utilise the funds sanctioned under the DMFs.

“This state of affairs is shocking. The state government did not make the DMFs operational, despite collecting ₹180 crore for the past two and half years. We have been told that the money was invested, but we have not been informed under what heads the sum was utilised. The affected villages have been approaching us for basic amenities such as drinking water. Those affected by the mining cannot be made to toil for benefits that are rightfully theirs and in whose name hundreds of crores of rupees are collected by these foundations,” the HC had said in March 2018.

“We repeatedly asked the additional advocate-general for an explanation for such colossal neglect, but none was forthcoming. We are at a loss for words to describe the (state government’s) apathy,” the court had observed.

Under Section 9(B) of the Mines and Mineral (Development and Regulation) Act, 1957, each state is obligated to establish a DMF for a district that is affected by mining activities.

Goa has two such DMFs, one each for north and south Goa.

DMF is entrusted with the responsibility to work for the interests and benefits of the public and the areas affected by mining activities.

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