Economy

First Draft of New National Minerals Policy Opts for Tweaks Over Structural Changes

While the draft does include new paragraphs on illegal mining and sustainable development, experts question whether it will be, as the Supreme Court recently put it, “effective, meaningful and implementable”.

A truck passes through an open pit of the Bedara Bhommanahalli (BBH) iron ore mines at Chitradurga in Karnataka November 9, 2012. REUTERS/Danish Siddiqui/Files

A truck passes through an open pit of the Bedara Bhommanahalli (BBH) iron ore mines at Chitradurga in Karnataka. Credit: Reuters/Danish Siddiqui/Files

New Delhi: The first draft of a government committee’s effort to revamp India’s national minerals policy – mandated as part of a recent Supreme Court judgement that slammed illegal mining in Odisha – retains the broad structure of the earlier 2008 policy while adding new paragraphs on illegal mining, sustainable development, compensating local tribal populations affected by industrial mining and responsible mine closure.

Civil society experts and environmentalists that The Wire spoke to believe that the changes, while helpful, may not do much to shake up an industry that over the last eight years has been marked by illegal and excess mining, environmental violations and unequal distribution of gains.

In August 2017, Justices Madan B. Lokur and Deepak Gupta ruled that 100% of the value of the iron and manganese ore that been illegally mined in Odisha would have to be recovered. As part of its judgement, the bench specifically singled out the ineffectiveness of the 2008 minerals policy while calling for a “fresh and more effective, meaningful and implementable policy”.

“The National Mineral Policy, 2008 seems to be only on paper and is not being enforced perhaps due to the involvement of very powerful vested interests or a failure of nerve. We are of opinion that the National Mineral Policy, 2008 is almost a decade old and a variety of changes have taken place since then, including (unfortunately) the advent of rapacious mining in several parts of the country. Therefore, it is high time that the Union of India revisits the National Mineral Policy, 2008 and announces a fresh and more effective, meaningful and implementable policy within the next few months,” the justices noted in their order.

In September, The Wire reported on the workings of the K.R. Rao committee that been set up to fulfil the Supreme Court judgment and the concerns expressed both by industry and environmentalists.

Illegal mining

How effective, meaningful and implementable – in the words of the Supreme Court – is the new policy? The Wire – which accessed a copy of the first draft (it will soon be released for public consultation after which it may be revised based on stakeholder input) – breaks down the new changes.

Over the last few years, it has become clear that mining regulations have failed to clamp down on illegal mining everywhere from Karnataka to Goa. The 2008 policy made only two references to illegal mining, both in a mostly inconsequential manner.

The preamble of the 2017 policy has been tweaked to acknowledge that an “efficient regulatory mechanism with high penetration of IT and e-governance” needs to be put in place. It also devotes a whole paragraph (Section 3.4, shown below) to tackling the problem of illegal mining through various technological methods.

“The advantages of IT and remote sensing technology shall be leveraged for ensuring a monitoring system which is transparent, bias-free, and one that has minimum human interference and effective deterrence effect. An effective follow-up action at various levels through effective coordination among various agencies will ensure prevention and curb illegal mining. In order to reduce human interface to obviate discretion and to promote transparency, physical inspections of mines shall gradually be replaced by virtual inspections by utilizing interventions from the areas of information technology, space technology and IT enabled services.”

While stakeholders have welcomed the addition of this paragraph, others point out that doing away with physical inspections (even in a phased manner) would be unwise.

Environmental action group Goa Foundation has pointed out, in its representation to the committee, that what is really needed is a mineral supply chain audit agency that will detect and prevent under-invoicing and other value leakages.

The first draft of the 2017 policy makes no reference to this even though this practice has become increasingly common. For instance, Indian income tax authorities detected under-invoicing to the tune of nearly Rs 90 crore in Karnataka by a company run by the Reddy brothers. In Goa in 2014, the enforcement directorate’s probe into illegal mining placed under-invoicing as a top priority – in addition to the obvious consequences of tax evasion, under-invoicing also inevitably leads to excess mining.

Global standards

Another currently missing aspect that civil society stakeholders have pushed for is having India move towards joining the ‘Extractive Industry Transparency Initiative’ – a global standard that is currently an effective  practice for controlling corruption. As The Wire reported, while this was brought up during the committee’s discussions last month, it was quickly dismissed by an industry representative, who joked that by adopting these standards it would make it difficult for companies to get bank loans.

Sustainable development and mining

The draft mineral policy also adds substantive paragraphs on ecologically-sensitive mining – although the bulk portion of this comes from adding portions of the government’s 2011 ‘Sustainable Development Framework’. This framework was also referenced in the 2008 policy but not added as it would take another three years for it to be finalised.

Portions of the 2011 sustainable development framework have been added to the 2017 policy.

In addition to this, the draft policy adds more paragraphs under section 7.13 on ‘Mine Closure’, in specific talking about how the government must ensure that “post-production mine decommissioning and land reclamation” are an integral part of the mine development process.

Mine reclamation seeks to rehabilitate a mine site to a viable, and wherever practicable, self-sustaining, ecosystem that is compatible with a healthy environment and other human activities. In this context, the government has a role in ensuring the reclamation of currently operating and future mine sites. Consequently, it will ensure that:

Post -production mine decommissioning and land reclamation are an integral part of the mine development process;

Financial provisions for the costs incurred in mine closure are accorded a level of priority by the industry similar to that given to start-up investment costs.

The committee also directs the government to ensure that “comprehensive plans for the reclamation of mined out areas are developed, including the provision of satisfactory financial assurances to cover the costs of reclamation and, where necessary, long-term maintenance”.

Zero-loss and intergenerational equity

Perhaps the most significant addition, especially for India’s civil society and environmental-activist community, comes in the form of two paragraphs that make reference to the concept of intergenerational equity – a principle that revolves around the idea of a state’s people getting the full value of mined merals when sold, with this money then being put into a fund that can hand out dividends to future generations.

An essential part of this concept is for the government to squeeze super-normal profits out of mining (basically reducing easy profit for corporates engaged in mining). A crucial paragraph that was added in the new policy is as follows:

Mining impacts a bundle of inherited assets. The mineral itself has value. Royalty, auction premia and other mineral receipts are essentially compensation for the sale of the mineral. For the mineral value itself, intergenerational equity requires three steps: First, the full value of the minerals must be received by way of consideration – the citizens as owners must not suffer a loss. Second, the proceeds received by Government from mining should be deposited in new, ”non-wasting” assets for the benefit of future generations such as a Future Generations Fund. Third, since minerals are owned by the citizens, a party of the commons, so too are the new assets. Therefore, any income generated must only be shared equally with all as a right ownership, a commons dividend. This follows property rights and is fair to all.

While environmentalists and civil society fought to include sentences on ensuring that separate caps on mining are required and that central and state governments should target “non-mineral revenue deficit instead of revenue deficit”, this hasn’t made its way yet into the draft policy.

Freight trains are loaded with iron ore at a railway station at Chitradurga in Karnataka November 9, 2012. REUTERS/Danish Siddiqui/Files

Freight trains are loaded with iron ore at a railway station at Chitradurga. Credit: Reuters/Danish Siddiqui/Files

Effectiveness and efficacy

However, questions of how effective the new policy will be still remain. Some of India’s most mineral-rich states –Odisha, Chhatisgarh and Jharkhand – have remained poor despite large-scale mining operations that have benefited industry.

The draft does add reference to the recent amendments to the 1957 Mines and Minerals Act, specifically to the district mineral foundation mechanism (which as of August 2017 have collected over Rs 11,000 crore across 12 indian states), but what civil society experts say is that the policy as a whole makes very little reference to how it should be operationalised.

“There has been almost no consideration of how to make the policy effective, meaningful and implementable,” said Claude Alvares, Director, Goa Foundation, as part of its representation to the government.

What is troubling is that the draft, at the moment, doesn’t direct the Centre to take effective action based on the policy itself.

For example, Section 3.2 of the 2008 policy (shown below) directed the Centre and state governments to formulate legal measures necessary to give effect to the new policy.

The Central Government in consultation with State Governments shall formulate the legal measures necessary for giving effect to the new National Mineral Policy, 2008, to ensure basic uniformity in mineral administration across the country and to ensure that the development of mineral resources keeps pace and is in consonance with the national policy goals. The MMDR Act,  the MCR and the MCDR will be amended in line with the policy. The regulation of mines and development of mineral resources in accordance with the national goals and priorities as spelt out in the policy and the legal framework shall be the responsibility of both the Central and the State Governments

The same section 3.2 in the draft 2017 policy talks about revisions in the various acts over the last few years and concludes that if the “need arises, they can be revised in line with the NMP 2017”.

The aforesaid Acts and rules have undergone major revision to eliminate discretion, improving transparency in allocation of mineral resources, simplifying procedures, eliminating delay in administration and obtaining for the government an enhanced share of of the value of mineral resources. As and when the need arises, they can be revised again, in line with the NMP 2017.

While revisions to regulations over the last five years have indeed reduced discretionary allocations, it remains to be seen how the rest of the new minerals policy will be operationalised to cut down on illegal mining, environmental violations and ensuring that the fruits of India’s mining boom are expanded to vulnerable and local communities.

Once this draft policy is made public, it will be open for wider consultation where stakeholder input will be taken. The policy is expected to be finalised by the end of December, 2017.