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'Draft Mining Bill will harm mining companies' by S Thiagarajan

Two months ago, Cabinet approved a draft law that seeks to create a better legislative environment to attract investments in mining and ease land acquisition through higher compensation to people displaced by projects. This show of goodwill could help the government win some hearts in troubled landscapes of Orissa and Karnataka. 

But mining companies are not entirely convinced as they have to pay higher royalties and want changes to be made before the law is enacted. India's largest miner, NMDC, is no exception. The company's director for finance S Thiagarajan says there are loopholes in the Bill that need to be plugged. "We have found that in many areas, the proposed legislation would not meet the needs of the industry and, in some cases, certain provisions could be counterproductive. 

One of the most important problems is mining by the unorganised sector. Small-scale miners operate in small land holdings with little application of technology and bypass most standard operating procedures by violating environmental norms. The new Bill proposes to free state governments from taking the Centre's approval to grant mining leases and, therefore, does not completely prohibit small lessees to mine ore. The highest bidder would be granted the lease and the party may not be the most capable of investing and arranging for scientific, eco-friendly and community support mining," he says. 

Secondly, in India, unlike many other countries, all minerals beneath the surface are properties of the state. Ergo, when the state arranges for the mine's exploitation by itself or an agency nominated by it, the benefits should accrue to all parties: the miner, the state and the locals. 

Again, the Bill requires more clarity on how all parties concerned will equally benefit. It calls for an equal amount of the royalty paid to the state to be deposited in a special district development fund meant for the region's advancement. For coal miners, the amount would be 26% of profits from the projects. 

"But is the royalty a one-time payment? If there is no subsequent fee to be paid, the state will stand to lose. Also, the question we miners are asking is whether a particular community can continue to benefit every year from the proceeds? The law should look at the issue of the state benefiting from the lease perpetually." The Bill is not equipped to curb illegal mining either. 

If the state grants leases, a number of vested interests could gain leases, he says. Miners are also asking for more transparency over the use of the proposed .`10,000-crore fund. Thiagarajan says, "From my reading, there could be a mismatch between development needed in the area and funds available. This may lead to a disparity between villages that are getting such funds and other villages that don't, leading to lopsided development." 

The issue of recovering money from mining companies for district development funds needs to be debated further. "The ministry of corporate affairs is considering a proposal to make corporate social responsibility (CSR) a statutory obligation. A company's finances could come under pressure if it is obliged to contribute to the district development fund in addition to CSR work it undertakes voluntarily, he says. 

NMDC has granted 11,500 scholarships to the economically-backward students in Bastar, one of the most impoverished regions in the mineral-rich Chhattisgarh state. Thirdly, we miners have requested for one nodal body and a single-window clearance for approvals required such as environmental, forest and so on. 

At present, it takes close to three years for miners to obtain clearances and start mining. While the Bill proposes to give automatic mining approvals once a discovery is made after prospecting, it doesn't talk of obtaining all clearances under one agency. The fourth objection relates to state government granting leases after consulting the locals and holding discussions on all aspects concerning mining, jobs and other sops. While companies do consult gram panchayats and obtain their nod before commencing mining, they do not deal with locals directly. Should this provision continue? asks Mr Thiagarajan. 

Royalty paid to the state is among the most contentious issues. "The proposed law does not state if the royalty has to be paid before or after tax. Any ambiguity will lead to huge financial repercussions." Many companies that have interests in mining have submitted a proposal to the ministry of mines seeking more clarity in some provisions and amendments to others before the Bill is passed by Parliament. The mining industry needs big money in exploration over a long period, but there's no guarantee that such efforts will throw up metal reserves. "If implementing all the rules of the book means an increase in cost, then companies may have to pass on the cost to the end-customer."