Sharing the wealth of minerals Sharing the wealth of minerals - - PowerPoint PPT Presentation

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 ater and li elihood sec rit

• Protect areas for ecological, water and livelihood security –

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 iti communities

• 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 d i l i i f b i i l d l d d

• Canada -- special provisions for aboriginals and land owned

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
• f 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

• perations 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 Th i f ti f DMF i t di t ib t t b fit

• The main function of DMF is to distribute monetary benefits

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

f ff t d l i t b d id d b th t t t

• f affected people is to be decided by the state government
• 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 h ldi ti i ht f f l d to person holding occupation rights of surface land – 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 ti l f t t diti l f i ht

• ccupational, usufruct or traditional surface rights

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 th ff t d l the affected people – 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
• n 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)

t R 38 000 hi h i th fi ti th can get Rs 38,000 per year which is more than five times the 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

Way Ahead Way Ahead

• Profit sharing provision doesn't mean uncontrolled mining.
• Mining still to be decided based on sound environmental and social

assessment with consent of the affected people. p p

• Profit sharing should then follow.
• Where to spend?: The money should not just be spent on the present.

Some to be kept for future use Broadly the money should be used for Some to be kept for future use. Broadly, the money should be used for three categories: – To reduce present impoverishment To build future livelihoods (education health livelihood trainings etc ) – To build future livelihoods (education, health, livelihood trainings, etc.) – To invest for future – after mine closure

Way Ahead Way Ahead

• Who should administer?: The composition of DMF is

p skewed

• The GC should be run and managed by representatives of

the affected communities There should also be the affected communities. There should also be representatives of district government and mining companies

• DMF should be open to state and public audit

p p

• The administrative cost of DMF should not exceed 5% of the

total annual funds

• All financial and non-financial information regarding DMFs

should be put in public domain (website, etc.)