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LATEST NEWS UPDATES | Mine and theirs

Mine and theirs

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published Published on Mar 15, 2011   modified Modified on Mar 15, 2011
The draft bill from the mines ministry that is meant to begin the overhaul of India’s outdated and archaic mining regulations — the Mines and Minerals (Development & Regulation) Bill, 2010 — had already been generally agreed to by the group of ministers scrutinising the legislation. Yet the deputy chairman of the Plan-

ning Commission, Montek Singh Ahluwalia, has made a telling point or two about a particular provision in the bill: to ensure that 26 per cent of the net profits from mining should be “shared” with local populations. The exact mechanism of this provision is still a little hazy. But Ahluwalia is concerned, reportedly, about the more macro implications. He feels that, “if we end up with too high a cumulative royalty burden compared with international standards, this will only discourage future investments in the mining sector.”

Even so, the argument for ensuring that mining industries are seen to be empowering local communities is strong. However, it’s questionable whether this is a sensible way of going about it. How would this work administratively, anyway? How will the money be distributed? Is it not likely that it will become just another way for companies to plough “social responsibility” funds into the favoured, cash-bleeding projects of those connected to the company’s management or owners? The problems with the implementation of this particular rule do not stop there, either. If the levy is 26 per cent of net profit, will not mining companies be able to fiddle their balance sheets in such a way that they get away with showing minimal net profit for the actual extractive business? That would not cause a reasonably competent accountant to break out in even a light sweat.

This is a provision that needs to be thought through better. Areas that surround mining sites are some of the least developed, in terms of social indicators, in India. But the responsibility for increasing social indicators there cannot be shrugged off by government. And particularly not to individual companies. Governments are, in the end, accountable to people; mining companies are not — and thus who knows what sort of job they’ll do? The equitable sharing of super-normal mining profits is something we need to get done. One efficient way to do this would be at the stage at which mining rights are auctioned; we would also need a market-based system that automatically detects windfall profits, too. The bill’s current mechanism does not seem to do the job.

The Indian Express, 15 March, 2011, http://www.indianexpress.com/news/mine-and-theirs/762408/


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