Month: May 2010

Mine or yours?

English: coal mine in India
Image via Wikipedia

The earth seems to have opened up under the government’s feet. One of the oldest industries known to mankind — mining — has suddenly emerged as the deepest pit of scams in India. There are allegations cropping up from almost every mining state, and the figures allegedly plundered add up to the biggest scam in the country. The current crop of scams started hitting the headlines last year. Former chief minister of Jharkhand, Madhu Koda, was accused of stashing away Rs 4,000 crore garnered through mining scams.

From Orissa, Rabi Das, convenor of civil society group Jan Sammelani, petitioned the Supreme Court that minerals such as iron ore, coal and manganese worth more than Rs 7,000 crore were being smuggled out of the state every year. On March 17, Karnataka’s leader of opposition, Siddaramaiah, alleged illegal mining losses to the state totalling Rs 5,000 crore.

The Union ministry of mines put a value of a mere Rs 64 crore as the amount lost to illegal mining in the first half of the previous financial year (April-September 2009).

But the total allegations made in court or on the floors of state assemblies tot up to more than Rs 20,000 crore — higher than the allocation proposed in the current Union budget for the country’s road transport system.

How does an industry that contributes less than 2 per cent of the national economic output account for its largest scam?

The blame game

The answer lies in outdated policies and the fact that mining remains one of the principal ‘real estates’ that government can hand out. The dissimilarities with other similar industries — telecom and oil and gas, where the government gives out spectrum and prospecting land — are probably because of the first reason.

Telecom minister A Raja has been accused of ‘forgoing’ Rs 10,000-100,000 crore while handing out spectrum. The mud-slingers said he could have priced it differently. But if a similar calculation is done for mining, by the government’s own admission, the ‘loss’ would have come to Rs 2,000 crore a year.

Here’s how the figure can be calculated. The amount the mining states made last year from the ad valorem duty of 10 per cent on some minerals introduced in August 2009 was Rs 4,000 crore. Before that, the outdated royalty system — under which a miner paid a fixed royalty, such as Rs 19 a tonne of high-grade iron ore that has been selling for thousands of rupees — fetched half the amount for the states annually.

Still, it’s a fraction of the money allegedly lost to illegal mining.

Stateside view

The problem is intense in Goa, a microcosm of the problems besetting an industry that’s governed by states.

Though Goa does not figure among the top eight mineral producers by value, it allocates a tenth of its land to mining. Last year, the profit of Goa’s top five mining companies crossed Rs 8,000 crore. Despite this, the state’s revenues from mining remained barely 1 per cent.

Following complaints, the Union government stopped future mining this February and ordered an environment impact assessment. But just before, the Centre cleared 100 new mining leases. “If 110 mines are causing damage, imagine the devastation if another 100 are allowed?” asks Manohar Parrikar, current leader of the opposition.

Add to that the rise in illegal mining. In the Economic Survey of 2005-06, nearly 2,66,000 square metres of government land was said to have been ‘illegally encroached’ by mining companies. According to Parrikar, Goa’s ore exports exceeded its production by nearly 10 per cent in 2007-08, which rose to 17 per cent in 2008-09. “How can you export more than you produce? There’s obviously massive illegal mining taking place in the state,” he says.

Even the state’s environment minister, Aleixo Sequeira, told the Assembly in March that 85 out of 99 mine operators were continuing mining without the mandatory air pollution clearance.

Stemming the rot

Moved by the scale of problems, state and central governments have belatedly stepped up efforts to address them.

The report of Anwarul Hoda Committee, which suggested comprehensive changes to the Mines and Minerals Development and Regulation Act (1957) in 2006, is set to form the backbone of a new policy drafted by the government. Handique told HT this week that his ministry hoped to table it in Parliament during the Monsoon session.

The Karnataka government, pushed by the Supreme Court to act on the 2008 report by Lok Ayukta N. Santosh Hegde, told the Union mining ministry at end-April that it raided the Bellikere and Karwar ports in March and stopped illegal exports of 5.5 million tonnes of iron ore.

The Reddy brothers —  Karunakara, Somashekhar and Janardhan — who allegedly run illegal iron ore mines in the state, got a reprieve last week from the Supreme Court that allowed them to restart operations. But the state is no longer treating them with velvet gloves.

The Orissa Vigilance Commission has booked nine cases against mining companies with the allegations totalling Rs 520 crore.

But the biggest measure lies in the new policy — giving an annuity to the people affected by mining. Handique told HT:  “Money has to be given by the mining companies. They cannot get everything free. Many of them don’t like the aspects of annuity. But you’re taking their property for good and you won’t give them anything? The Naxals have started talking about this.”

If mining fuels discontent that sways groups of people towards “India’s gravest internal security threat”, the Maoists, it will become the country’s biggest headache in more ways than one. This pit is definitely going to get deeper.

Reports by Shalini Singh from Goa, Salil Mekkad from Karnataka, Priya Ranjan Sahu from Orissa, and Aasheesh Sharma and Praveen Donthi from New Delhi.

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