Sharing the wealth of minerals Sharing the wealth of minerals Souparno Banerjee p j
A new geography A new geography
Rich lands, poor people: The way ahead Rich lands, poor people: The way ahead New ‘social and environmental ’ contract with the mining g industry - Protect areas for ecological, water and livelihood security – Protect areas for ecological ater and li elihood sec rit designate ‘go/no-go areas - Codify detailed environment management regulations for y g g mining, including reframing rules for mine closure -Restructure and strengthen regulatory institutions; make them acco ntable accountable - Let the people decide – mining should not take place without their consent -- Share substantial benefits with the community
Global practices on profit sharing with communities iti • Papua New Guinea 's Mining Act 1992-- provision for establishing a De elopment For m to cons lt affected people establishing a Development Forum to consult affected people and decide on a profit sharing mechanism. • Act also makes provision for mining companies to share at p g p least 20 per cent of royalty payments with the landowners of the affected area • C Canada -- special provisions for aboriginals and land owned d i l i i f b i i l d l d d by them (similar to schedule V and VI areas in India) • Land Claim Agreements (LCAs) grant special mining rights to Land Claim Agreements (LCAs) grant special mining rights to aboriginals; define the area and mineral rights for them • Government pays them 5% of the royalties • Impact Benefit Agreements with companies – negotiated on a case by case basis
Global practices on profit sharing... Global practices on profit sharing... • Australia -- recognises the special rights of aboriginals • Under the Land Rights Act, an Aboriginal Benefit Reserve (ABR) is established by the state government which receives and disburses the mining royalties and disburses the mining royalties • Under the Native Title Act, people are given the right to enter into negotiations with mining companies. Indigenous Land Use Agreements are signed, which are legally binding for the parties, and include provisions for benefit sharing
Draft MMDR Bill, 2011 Draft MMDR Bill, 2011 • Mines and Minerals (Development and Regulation) Act – ( g ) enacted in 1957 – for development and regulation of the mining industry • Two rules -- Mineral Concession Rules (MCR) and the • Two rules Mineral Concession Rules (MCR) and the Mineral Conservation and Development Rules (MCDR) • MMDR amended 4 times – first three to increase the control of the government over mining. The last one done in 1999 to allow large-scale privatisation • MMDR, 2011 promotes large-scale private mining but has MMDR 2011 promotes large scale private mining but has many provisions for addressing the social, economic and environmental issues associated with mining
Draft MMDR Bill, 2011 & Profit Sharing Draft MMDR Bill, 2011 & Profit Sharing • Profit sharing introduced in India for the first time under MMDR Bill, 2011 • A mine lease holder is liable to pay 26 per cent of his profit after tax or an amount equal to royalty whichever is higher after tax or an amount equal to royalty, whichever is higher, as annual compensation to a District Mineral Foundation (DMF) • The lease holder is also to allot at least one non- transferrable share to each person of the affected families • The state government is to identify directly or indirectly • The state government is to identify directly or indirectly affected people/families by mining operations, before these operations begin • The state government is also to ensure that monetary benefit flows to these affected people
Profit Sharing Profit Sharing • The DMF, to be constituted by the state government, is to function as a trust fund • The main function of DMF is to distribute monetary benefits Th i f ti f DMF i t di t ib t t b fit to affected persons/families holding occupation, usufruct or traditional rights • The payments can be quarterly or annually • How much monetary benefit is to be given to which category of affected people is to be decided by the state government f ff t d l i t b d id d b th t t t • This amount, on an average daily basis, is not to be less than the amount payable to a person under NREGA the amount payable to a person under NREGA
Profit Sharing Profit Sharing • The DMF is to be managed by a Governing Council (GC) • The GC is to consist of: – District magistrate (Chairperson) – District mining officer (Secretary) – Zila parishad president Zila parishad president – All mine lease holders in the districts – Head of local offices of concerned departments Head of local offices of concerned departments – Representative of IBM – Representatives nominated by DM in consultation with p y affected people
Profit Sharing Profit Sharing • The GC is to: – Draw an annual budget of the DMF with the available money – Approve disbursal of payments to affected people – Approve other expenditures Approve other expenditures
Other benefits Other benefits • Other compensation under the draft include: – Prospecting Licence (PL) holder is to pay compensation t to person holding occupation rights of surface land h ldi ti i ht f f l d – PL holder also to pay compensation for damage to land – Mine lease holder to provide employment and other Mine lease holder to provide employment and other assistance as under the Rehabilitation and Resettlement (R&R) policy of the concerned state to people holding occupational, usufruct or traditional surface rights ti l f t t diti l f i ht
Other benefits Other benefits – The state is to assess any damage to land on the termination of a mineral concession. Then it is to determine a compensation amount payable to people determine a compensation amount payable to people holding occupation, usufruct or traditional surface right. This compensation is to be decided in consultation with the affected people th ff t d l – A CSR document is also to be submitted with the mining plan. This is to have a scheme for the annual expenditure plan. This is to have a scheme for the annual expenditure on socio-economic activities in and around the mine lease area
Consulting local community Consulting local community – Gram sabha or district council in fifth and sixth schedule areas and the district panchayats in non-schedule areas to be 'consulted' before inviting bids for prospecting to be consulted before inviting bids for prospecting licence or mining lease and for the mine closure plan. – What this consultation means, in which form it will be conducted and what will be its validity has not been defined.
Profit Sharing and mining districts Profit Sharing and mining districts • Royalty paid during 2010-11 in India stood at Rs 10,500 y y p g , crore which is 10.5 per cent of value of mineral production • If profit sharing provision is implemented, at least Rs 10,500 crore will be generated as share of profits for affected crore will be generated as share of profits for affected communities • The top 50 mining districts, in terms of value of mineral p g , production, will get Rs 9,000 crore • Every directly affected persons (estimated to be 2.5 million) can get Rs 38,000 per year which is more than five times the t R 38 000 hi h i th fi ti th poverty line in the country • Odisha can get to the tune of Rs 1,750 crore as share of Odisha can get to the tune of Rs 1,750 crore as share of profits from mining
Profit Sharing and mining districts Profit Sharing and mining districts • Dantewada, the most naxal affected district with 80% ST , population and majority BPL, with get Rs 400 crore as profit share. Every household can be given Rs 40,000 annually • Keonjhar produces more than Rs 7,000 crore worth of Keonjhar produces more than Rs 7 000 crore worth of minerals. Every directly affected person in the district will get Rs 60,000 annually • In Sundergarh, every directly affected persons will get Rs 45,000 annually
Will it affect the profitability of companies? Will it affect the profitability of companies?
Way Ahead Way Ahead • Identifying beneficiaries : Identifying directly and indirectly affected people will prove a challenge. Gram sabha should be involved be involved • The affected people categorisation should be rational • Direct payments should be restricted to people whose p y p p livelihoods have been affected/lost • For older mines, this identification poses a bigger challenge due to in and out migration A district level fund to be devised due to in and out migration. A district level fund to be devised with targeted expenditure
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