For effective District Mineral Foundations

Recognising the impact of mining related operations on local communities, the government is exploring new policies to promote sustainable and inclusive resource development. In an attempt to use mining surpluses in local area development, the Mines & Mineral Development Regulation (MMDR) Bill calls for the creation of a District Minerals Foundation.

According to the bill, the major mineral producing companies, except coal producers, will shell out an amount equivalent to their royalty, while coal producing companies will contribute 26% of profits. Minor mineral producers will set aside an amount as prescribed by the state government towards this foundation. In other words, the mining will pay an additional amount from its profits towards the benefit of local population. This may earn them an improved social licence to operate.

Funds of the foundation will be used for the development and improvement of the specific district only, unlike the state consolidated fund that is supposed to be used for the entire state.

However, there are concerns about the concept, governance and disbursement aspects. The bill stipulates that companies contribute to the fund at the district level; however, it requires more clarity on how each company's share will be estimated at the district level. Further, even though the bill lists the areas (in order of priority) where the fund collected may be distributed, it is still not clear as to how the funds will be divided amongst the given activities.

Also, it is being speculated that the additional money that the companies will have to pay may translate into a rise in the price of coal. The government needs to check on how this contribution will be treated and ensure that the company doesn't pass on this burden to the consumer.

Also, with other initiatives taken under the resettlement & rehabilitation and CSR policies, the government also needs to avoid multiplicity of payments to address similar issues and ensure that the district has the capacity to absorb and manage the funds allocated.

Further, a transparent mechanism has to be put in place to ensure that the funds flow to the affected people. The complex nature of the mining industry makes it difficult to identify the affected people. India's experience with the utilisation of funds, like the cess on oil and compensatory afforestation fund, also brings forth weak departmental co-ordination and limited transparency in fund administration. With many stakeholders involved in the administration, management and disbursement of funds, an oversight mechanism and a mutually agreed upon end-use reporting framework are needed.