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LATEST NEWS UPDATES | Miners may have to pay for the project-hit from day 1 by Subhash Narayan

Miners may have to pay for the project-hit from day 1 by Subhash Narayan

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published Published on Nov 11, 2010   modified Modified on Nov 11, 2010

Mining companies will have to start paying compensation to project-affected people right from the day a mining block is allocated to them and not when they start generating profits, a proposal that will further sweeten the deal for those who lose their land to industrialisation, but stoke more protest from miners.

Once the project starts making profits, the displaced families will be provided an annuity income from the net income, but this could take as long as three years in capital-intensive investments such as mining. The proposal will ensure income support till the time the venture starts to make profits, but mining companies will be allowed to claim these as expenditure on turning profitable.

“We are considering a proposal whereby mining companies may be asked to ensure that all the affected people start getting at least the amount guaranteed under NREGA from the day mine lease is issued ,” said an official of the mines ministry involved in finalising the draft of the new Mines and Minerals (development and regulation) Bill.

The minimum wage under the National Rural Employment Guarantee Act (NREGA) is Rs 100 a day, and under the proposal each member of the family will receive this amount.

The draft of the new Bill has proposed an annuity equal to 26% of the profit after tax (PAT) of a mining operation or sum equivalent to royalty paid (whichever is higher) as compensation to project-affected persons.

The suggestion has found favour with finance minister Pranab Mukherjee , who is also heading a group of ministers (GoM) that is finalising the draft mining legislation.

In an interview to ET NOW, the newspaper’s news channel, the finance minister had said that means should be identified to address the needs of displaced persons before mining operations started rather than waiting for them to generate profits.

Under the proposed changes, mining companies would also be allowed to set off or adjust payments made to land losers in the initial years of mining against profits generated subsequently. “This will prevent excessive burden on companies,” said the official quoted earlier.

The funds collected from mining operations (both initial payment and profit) will be pooled into a fund by District Mineral Foundation to ensure equitable distribution within the district.

The minimum amount payable to affected persons will be daily amount payable under NREGA.

The proposal of 26% profit sharing has already been opposed strongly by mining companies which feel that it will render operations unproductive.

“I feel that royalty-linked compensation mechanism will work better than profit-sharing formula as it will ensure availability of funds on a continuing basis and will be easy to calculate with revision as royalty rates are revised,” said RK Sharma , secretary general, Federation of Indian Mineral Industries (FIMI).

“The proposed (26% profit sharing) will be a big deterrent in attracting investment in the mining sector. Besides, it will incentivise people to remain unproductive ,” said Siddharth Rungta, president, Rungta Mines . The company has large mining operations in Orissa.

The government is also divided over profit-sharing formula with steel minister Virbhadra Singh favouring special consideration for PSUs, such as SAIL and NMDC. “There is an immediate need for consensus among stakeholders on key policy enablers like the proposed MMDR Act and R&R policy,” SAIL chairman CS Verma told ET earlier.


The Economic Times, 11 November, 2010, http://economictimes.indiatimes.com/news/news-by-industry/indl-goods-/-svs/metals--mining/Miners-may-have-to-pay-for-the-project-hit-from-day-1/articleshow/69050


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