District Mineral Foundation funds crucial resource for ensuring income security in mining areas post COVID-19

Brookings | Srestha Banerjee | May 06, 2020

The Prime Minister of India held a meeting on April 30, 2020 to consider reforms in the mines and coal sector to jump-start the Indian economy in the backdrop of COVID-19. The mining sector, which is a primary supplier of raw materials to the manufacturing and infrastructure sectors, is being considered to play a crucial role for the resurgence of the economy post the lockdown and in the coming years.

While several reforms are being mulled over to boost mining businesses, the Centre and the state Governments also need to consider boosting local livelihoods. In the context of mining districts, the District Mineral Foundation (DMF) funds can be used for prioritising livelihood generation and creating local jobs. The Prime Minister in the latest meeting has also discussed the scope of improving “community development activities” through the fund.[1]

DMF was instituted in March 2015, under the Mines and Minerals (Development and Regulation) 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. In September 2015, the Centre further aligned DMF with the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) scheme, to implement various developmental projects and welfare programmes in mining-affected areas using DMF funds.[2]

Livelihood and income generation is a key issue that DMFs need to focus on for mining-affected communities across the country. This has been emphasised through the MMDR Amendment Act 2015 and the respective State DMF Rules developed under it, as well as the PMKKKY scheme. The emphasis comes in three ways.

Firstly, considering the fact that mining-related activities lead to significant displacement and loss of livelihoods in these areas, the law specifically notes that people who have lost their land rights (including user and traditional rights) due to mining or whose livelihood has been affected by such activities, constitute DMF beneficiaries. Secondly, one of the defined objectives of PMKKY is to ensure long-term sustainable livelihood for the people affected by mining. Finally, following the PMKKKY guidelines, livelihood and skill development have been recognised as ‘high-priority’ issues under all state DMF Rules on which districts must invest adequately.

Besides regulatory prerogative, the economic situation in the mining districts also clearly point out why income generation and creation of diverse livelihood opportunities should be a focus of DMFs. For example, in most of the mining districts, particularly in the rural areas where most mines are located, the income level among the local population is extremely low. As per socio-economic caste census of the Government of India, in a majority of these districts, 80 to 90% of the rural households have the highest earning member getting below Rs. 5,000 per month (Table 1: Distribution of household earnings in rural areas of some top mining districts). What adds to the low-income levels is the income uncertainty, as more than 50% of the workforce comprise of manual and casual labourers in these districts. Poverty and uncertainty of income also undermines the access to adequate food, proper healthcare, education and all such basic needs.

Table 1: Distribution of household earnings in rural areas of some top mining districts

StateDistrictHouseholds having monthly income of highest earning household member less than Rs. 5,000 (%)Households having monthly income of highest earning household member between Rs. 5,000 to10,000 (%)Households having monthly income of highest earning household member more than Rs. 10,000 (%)
OdishaKeonjhar90.65.24.2
Sundargarh89.85.44.8
JharkhandWest Singhbhum53.837.38.9
Chatra83.211.85.0
ChhattisgarhDantewada94.73.12.2
Korba91.34.44.3
RajasthanBhilwara82.511.85.5
Chittorgarh84.010.55.5
Madhya PradeshSingrauli86.59.93.6
Satna82.311.76.0
TelanganaKarimnagar78.817.04.2
Khammam74.621.44.0
KarnatakaBellary72.020.37.7
Gulbarga47.530.921.6
MaharashtraYavatmal74.915.99.2
Chandrapur79.710.69.7

Source: Socio economic caste census, 2011, Government of India

Neglected so far, livelihood investments must now be a priority for DMFs

Despite the mandate to improve livelihood and income among communities in the mining-affected areas, DMFs in almost all mining states have failed to make the required investments on this extremely important sector so far. For instance, in most of the top mining states, the funds earmarked for livelihood and skill development are negligible compared to the total cumulative accrual of DMF funds (Table 2: Allocation of DMF funds for skill development and livelihood in top mining states). The allocation towards this account for only 0-4% of total allocations for various developmental works in these states. [3]

Table 2: Allocation of DMF funds for skill development and livelihood in top mining states

StateTotal DMF accrual(Rs. Crore)Allocation for livelihood and skill development(Rs. Crore)
Odisha9,772196.0
Jharkhand5,3050
Chhattisgarh5,115456.3
Rajasthan3,6280
Madhya Pradesh2,938No information available
Telangana2,79080.0
Karnataka1,88562.0
Maharashtra1,79148.0

Source: Ministry of Mines, Government of India, DMF fund status up to February 2020 and State Government mining departments. [4]

The course must now be corrected. As policymakers at the Centre and state levels discuss relief measures for the poorest and reviving their income, they have an opportunity to strengthen implementation of key programs like PMKKKY and DMF to improve the ground situation. For this, the Centre and respective state governments need to provide clear directions to all districts.

With more than Rs. 36,858 crores in DMFs across the country, the potential of this fund is enormous for improving socio-economic conditions of local communities in the mining districts. As we start a new financial year, it is also the time for DMFs to start planning and budgeting for the 2020-2021. The law requires DMFs to undertake such annual planning considering the situation on the ground and capturing the need and aspirations of local communities.

For DMFs in all districts, much attention must be paid to skill development and providing other resource support for sustainable income generation. This, as noted earlier, is also enshrined in the third objective of PMKKKY and a priority component of all State DMF Rules.[5] Considering the potential of local skills and resources, employment opportunities can be improved through multiple means. For example, incentivising livelihood opportunities around local resources such as forest products can be helpful as many of the mining areas are rich in forests. In fact, the Government of India last week announced raising of minimum support price (MSP) for 49 varieties of minor forest produces, including wild honey, tamarind, mahua flowers and seeds, lac, sal leaves etc., in view of circumstances arising out of Covid-19.[6] DMF funds can further be used to support market linkages for these produces and their products to ensure better economic value for the goods. Besides, agro and horticulture-based industries should be developed which will be relevant to the knowledge and skills of the local people. Providing support to women self-help groups (SHGs) on micro enterprises such as poultry farming, dairy, sericulture, handicrafts, handlooms, etc. will also be important to improve women participation in the workforce. At the same time creating a workforce for various occupations including health care givers through proper training will be crucial for supporting income as well as bridging resource gaps in primary healthcare.

DMFs in various states and districts cannot afford to put the issue of livelihood in the backseat anymore. Given the urgency of the economic situation the states and districts must shore-up investments towards this.

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.

Intricacies of abolishing child labour

The Hans India | Dr MOHAN KANDA | April 10, 2019

Much has been said and written about the scourge of child labour, worldwide as well as in India. The malady has had a chequered history for centuries, with societies and governments adopting approaches suited to the ethos and culture of their environments at different times.

rom the second half of the previous century, however, it has been accepted universally that employing children for work is a pernicious practice. As a result, several measures have been taken, legal, policy and operational, by various countries including our own.

In the strict and formal sense, child labour refers to the exploitation of children through any form of work that deprives them of childhood, prevents them from attending school and harms them physically, mentally, socially and morally. Read more

Over 19 million kids in Bangladesh at risk from climate change

Down To Earth || Kiran Pandey, Madhumita Paul || 05 April 2019

UNICEF report says nearly 86% of these children living in 17 districts are under threat from floods and cyclones

More than 19 million children in Bangladesh, from 20 of the country’s 64 districts, are most vulnerable to the disastrous consequences of climate change, warned the United Nations Children’s Fund (UNICEF) in a new report.

Over five million of them are under the age of five and the changing climate is already undermining their lives and diminishing their prospects for a better future. Children staying on the coastline facing the Bay of Bengal and several more remote inland areas are the most vulnerable, notes the report. Read more

Seven decades after Independence, many in Odisha’s villages still drink contaminated water from pits

First Post || Manish Kumar || Mar 27, 2019

A large section of the rural populace of Keonjhar district in Odisha is struggling for access to a basic survival need.

A network of 60 reporters set off across India to test the idea of development as it is experienced on the ground. Their brief: Use your mobile phone to record the impact of 120 key policy decisions on everyday justify; what works, what doesn’t and why; what can be done better and what should be done differently. Their findings — straight and raw from the ground — will be combined in this series, Elections on the Go, over a course of 100 days.

Keonjhar: Seven decades of Independence and other progress notwithstanding, a large section of the rural populace of Keonjhar district in Odisha is struggling for access to a basic survival need — safe drinking water. To make matters worse, this Lok Sabha constituency, which has the maximum operational mines in the state, is also being ravaged by miners, who are minting money at the cost of natural resources. Read more

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