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CSE deposes before Rajya Sabha panel, seeks people- and environment-friendly amendments

Deposition before the RajyaSabha Select Committee on the Mines and Minerals

(Development and Regulation) Amendment Bill (MMDR) 2015

March 14, 2015

Centre for Science and Environment, New Delhi

mining

There is a need for an urgent amendment to the Mines and Mineral (Development and Regulation) Act (MMDR) 1957, but we would like to express and put on record our deep concern that the 2015 Amendment Act will not resolve outstanding issues in the mining sector; it will instead increase the marginalization of local people, mainly tribals and also harm the environment. We would like to submit that it therefore needs revision to incorporate these concerns.

In 2008 the Centre for Science and Environment published a detailed report on the mining sector titled: Rich lands, poor people: Is sustainable mining possible? We explained that minerals are found where forests are found; water comes from; tribals live; the poorest of India lives and local strife is increasing. We intervened to ask for a new balance for mineral extraction but keeping in mind the interests of people and environment.

We believe that the MMDR Bill 2011 made an attempt to balance these concerns. There were lacunas but it recognized the need to incorporate community interests and environmental protection. In this way there was a move ahead in MMDR 2011 from 1957.

But we believe that MMDR 2015 is one-sided. It protects the interests of miners; increases revenue for states; but does little to protect the interests of people and environment.

We also believe this will not work and this policy is shortsighted. The problems faced by the mines sector are not just about the lack of auctioning or transparency in bidding process; but because of extremely destructive and reckless mining that has created problems for local people; destroyed the environment. This has in turn led to a backlash – which has resulted in court actions in Goa, Bellary and other places. Therefore, there is a need for oversight in the operations for mining and to safeguard interests of people and the environment.

Our detailed comments on the MMDR Amendment 2015 are as follows:

The Mines and Minerals (Development and Regulation) Amendment Bill (MMDR) 2015, that has been tabled before the Parliament “seeks to amend the MMDR Act, 1957, in order to develop country’s mining sector to its full potential and to put the nation’s mineral resources to the best use for national economic growth”.

As indicated by the Ministry of Mines, the MMDR Bill, 2015, is designed to eliminate discretion in the grant of mineral concessions, bring in transparency in the allocation of mineral resources, simplify procedures and remove delays in decision-making, provide impetus to the mining sector, encourage exploration and investment, safeguard interest of affected persons and develop stronger provisions to check illegal mining. However the Bill

as structured, will do little in resolving many of these issues, rather holds the potential to create more problems in future.

1. 2. 3. 4.

5.

We need to judge the MMDR Amendment Bill, 2015 on the basis of five key

objectives, which concern the mining sector and mineral needs of the country, the

people who are affected by mining and the environment.

Does the Bill make the local community partners in the mineral development of the

country;

Doesthe Bill hold the promise to capture windfall profits from mining and share the

wealth of mining with the local community, the state and the nation;

Does the Bill encourage, and has the potential, to steer the mining sector to adopt

environment friendly practices;

Does the Bill promote the development of modern, scientifically advanced and

efficient mining sector to fulfill the present and the future mineral needs of the

country;

Does the Bill put in place the regulatory and the facilitative institutions for the

transparent and accountable functioning of the mining sector.

1. Does the 2015 Bill make the local community partners in the mineral development

of the country?

The MMDR 2015 Bill fails to make communities and the institutions of local government

partners in the mining and mineral development process. None of the progressive

provisions of the MMDR Bill, 2011 have been included in the 2015 Bill. Though we were

not completely satisfied with the 2011 Bill, still the bill had many progressive provisions

for consultation and involvement of the institutions of local government. In this context

two important provisions can be referred to.

  • In 2011 MMDR Bill, notification of public lands for all types of mining concessions had to be done in consultation with the gram sabha or district council in fifth and sixth schedule areas. In non-schedule areas district panchayats were required to be consulted. This was a very important provision as local people, mainly tribals do not own land in large parts of scheduled areas. Similarly, before approving the progressive and final mine closure plan, the Indian Bureau of Mines (IBM)was required to consult the local penchants on the planned land use.
  • The most problematic part of the MMDR 2015 Bill is that it has denied and removed the usufruct and traditional rights of communities over their land and resources. In the MMDR 2011 Bill, all compensation, rehabilitation and resettlement had to be settled not only for persons having occupational rights over the land, but also for those having the usufruct and traditional rights. Removal of such provision will have huge implications in deciding compensation and rehabilitation and resettlement. This will lead to further alienation of tribal communities in the scheduled areas.

2. Does the 2015 Bill hold the promise to capture windfall profits from mining and

share the wealth of mining with the local community, the state and the nation?

With respect to this question, we will focus on sharing the profits of mining wealth with

communities.

In the 2011 Bill, for major minerals, the leaseholder had to pay the district mineral

foundation (DMF), an amount equivalent to the royalty paid during the financial

year annually. For coal and lignite, it was to be an amount equal to 26 per cent of the

profit after tax. We had done detailed analysis in 2011 and found that this amount

paid to the district mineral foundation would not affect profitability of companies.

The DMF was to use this fund for specific purpose,which was indicated in the 2011

Bill.

These provisions have now been significantly diluted. Leaseholders are now

required to pay “not more than one-third” of the royalty for all respective minerals,

as compared to equivalent royalty or 26 per cent profit in the 2011 Bill. It is now up

to the states to decide how these funds will be used. So, not only the size of the funds

has been considerably reduced, they can now be potentially misused too. Reduction

of profit sharing provision by two-thirds means that from the idea of sharing profits,

this provision has now been reduced to a charity.

3. Does the 2015 Bill encourage, or has the potential, to steer the mining sector to

adopt environment-friendly practices?

Most mining areas in India are critically polluted areas as environment management

practices of mines are in the cradles, and our regulatory institutions have failed to push the

mining industry towards adopting better practices. There are many examples of poor

mining practices, but just one, which is with respect to mine closure, can sufficiently bring

out the extent of hazards associated with such practices.

India has the distinction of coining a term called as “orphaned mines”. These are mines

where minerals have been removed and the concerned mining company has run away

without closing and rehabilitating the mines. These orphaned mines are major causes of

pollution. In many coal-mining areas, these orphan mines are leading to leakage of highly

toxic acidand incidences of mine fire is common. In the iron ore belt, they lead to huge air

and water pollution. Over the past 20 years, regulations have been tightened to improve

the mine closure practices,such as the requirement for progressive mine closure and

provision of a financial bond to ensure that companies close the mines before they leave.

These provisions are still evolving and therefore the practice is still poor, but is slowly

improving.

The provisions of the 2015 Bill seriously jeopardize these gains.

Under the new Bill, all mining leases will now be granted for 50 years. The lease for existing

mines has also been extended to 50 years. After expiry, leases can be re-auctioned. This

creates problems at multiple levels.

From an environmental perspective, it doesn’t make sense to keep thousands of

mines opened at one point of time as every open mine is a source of pollution. This

is what the 50-year mine lease provision will do.

From an economic perspective too, it does not make sense why mines should be

given a 50-year lease period as it amounts to sitting and speculating on resources. It

makes sense to open a mine, remove all minerals quickly and progressively

rehabilitate and close the mine and return the land to the landowners.

The long lease period with subsequent re-auctioning provision will now create

incentive for leaseholders to do the opposite. They would keep the mines open and

shift the burden of rehabilitation to future generations. The long lease period will

also create difficulty in establishing appropriate financial guarantees to ensure that

mine closure will happen. This will bring back the practice of “dig and run”, adding

to India’s poor legacy of orphaned mines.

The 30-year lease period under the parent MMDR Act was itself problematic as

there was no provision for detailed periodic assessment and most mines were doing

progressive rehabilitation poorly. Only during the time of renewal some assessment

was done. Now with a flat 50-year lease period, with no provision for periodic

assessment given in the Bill, the situation will worsen.

Our assessment is that the theme of sustainable development has been downgraded in the

2015 MMDR Bill. Under the National Mineral Policy 2008, the Sustainable Development

Framework was to be an important basis for undertaking socially and environmentally

responsible mining. In the MMDR 2011 Bill there were provisions for development and

implementation of the National and State Sustainable Development Framework. These

provisions have been diluted in the MMDR 2015 Bill.

4. Does the Bill promote the development of modern, scientifically advanced and

efficient mining sector to fulfill the present and the future mineral needs of the

country?

We represent an environmental organization, but we are also conscious of the fact that

minerals will continue to play an important role in the sustainable development pathway.

We will need minerals to meet the basic social and physical infrastructure needs of the

country. We will also need minerals for future advanced technologies, for the development

of renewable energy sector and for developing energy and resource efficient technologies.

Therefore, having a long-term vision for the sustainable future of the mining industry is

very important. The Bill, however, has more focus on short-term needs than long-term

requirements. In fact, some of the provisions of Amendment Bill 2015 might limit

innovations and investments in the sector.

Two major provisions under the 2015 Bill inflict such limitation; first, auction of all

concessions, and second, provisions on reconnaissance.

The Bill creates a blanket provision for granting all types of mineral concessions through

auctioning, including mining leases and also prospecting-cum-mining leases. Though

auctioning is a fair and transparent process, it does not give desire results in all cases.

Auctioning is the best way to allocate mineral concessions where the deposits can

be accurately established and proper valuation can be done. This will capture the

windfall profits of mining as well as bring transparency in the allocation of leases.

In cases where mineral deposit valuation cannot be done, auctioning can result in

undervaluation of minerals and subsequent lower revenue earnings for the state

government; or overvaluation, resulting in the inability of the concession holder to

meet commitments.

Auctioning, therefore, is not suited for prospecting. For prospecting, a transparent

“first-in-time” principle is used across the world. By mandating auctioning of

prospecting-cum-mining leases, the Bill has introduced huge uncertainty in future of

the sector.

Similarly, the Bill might also end up restricting investments in exploration. The long-

term growth of sector is dependent on advanced technologies and large investments

in exploration. Though public investment in exploration is important,

reconnaissance/ regional exploration requires private risk capital. The Bill

discourages this. On the one hand, it promotes “open sky” policy for reconnaissance

by granting non-exclusive permits, while on the other hand it does not guarantee

any return to the investors. This will restrict investment in high-tech exploration,

which is urgently needed for deep-seated strategic minerals.

Finally in all cases of auctioning, conditions of bidding should be structured

appropriately taking into account social and environmental safeguards. This is not

being done currently forauctioning coal-mining leases, and should also not be the

case for auctioning of mining leases of other minerals.

5. Does the Bill put in place the regulatory and the facilitative institutions for the

transparent and accountable functioning of the mining sector?

We know that today, the mining sector is plagued by poor and multiple regulations,

discretionary decision-making powers, weak institutions, inadequate monitoring and

feeble enforcement. These are the main reasons for large-scale irregularities that exist

today, be it illegal mining, destruction of environment or ill treatment of mining-affected

communities. Simply put, the entire governance structure of the sector is outdated and

needs serious reforms.

Just one example can demonstrate the inefficiency and inadequacy that exists in the

governance structure.With respect to environment, health and safety management

in the mines, currently, four regulatory institutions are involved. The Ministry of

Environment, Forest and Climate Change (MoEF&CC) is responsible for giving

environmental and forest clearances, the IBM clears mining and Environment

Management Plans (EMPs) – the MoEF&CC can also clear EMPs , State Pollution

Control Boards are responsible for giving Consent To Establish and Consent To

Operate under the Water Act, 1974and the Air Act, 1981, and the Directorate

General of Mines Safety is responsible for monitoring the health and safety of

workers.There is a lot of overlap in the responsibilities of these institutions, with

each having very little capacity to monitor and enforce the law. Removing

multiplicity of these institutions and strengthening their capacity must be a priority

of mining governance reform. This has not been addressed in the MMDR 2015 Bill.

The MMDR Bill 2011, had provisions for serious institutional reforms. These

included provisions for setting up a National Mineral Royalty Commission (NMRC)

by the central government to review and suggest revisions in royalty rates and dead

rent rates; establishment of National and State Mineral Fund to support to R&D in

sustainable mining, developing capacity of IBM and of State Directorates, detecting

and preventing illegal mining, promoting scientific mining. The 2015 Bill does not

include these.

The major reforms proposed by the MMDR Bill, 2015 include introduction of an

auction mechanism for allocating all mining concessions; provisions for timely

decisions; increase in penalty for violations; and creating special courts for speedy

trial of offences. Considering the challenges, these reforms are inadequate and some

of them could potentially create more problems. For instance, simply increasing

penalty for violations within the existing institutional framework makes rent-

seeking behavior even more lucrative and will not be effective in curbing illegality.

Similarly, auctioning of mineral concessions requires strong and scientifically

competent institutions to establish reserves and valuation. In the absence of such

institutions,

auctioning can be manipulated. Auctioning, therefore, is not a substitute to but a part of the larger reform in governance. This fact has been missed in the MMDR 2015 Bill.

• The Bill also has other major shortcomings.For instance, it does not address the issue of illegal mining adequately. The issue has been primarily addressed by increasing penalty or through trials once offences occur. This misses out on the need to strong institutions that can actually curb such activities. The Bill also promotes captive mines. Our experience has been that if one wants to see poor mining practices, captive mines can be the ones. These issues we have addressed in detail in our policy briefing and our research in evaluating the performance of the cement sector, and the iron and steel sector.

Finally we have to consider the MMDR Amendment Bill, 2015 along with other ongoing

regulatory reforms; the proposed changes in LandBill, 2015 (the Right to Fair

Compensation and Transparency in Land Acquisitions, Rehabilitation and Resettlement

Amendment Bill, 2015), and the report (November, 2014) of the High Level Committee of

the MoEF&CC chaired by TSR Subramanian, suggesting revisions in all major

environmental laws. While, the MMDR Bill, 2015, discourages consultation, excludes

affected people and reduces the benefit that local communities can get from the mining

sector, the Land Bill removes the clause requiring community consent, and the

Subramanian Committee report recommends fast-tracking of environment and forest

clearances for mining projects. If we join all dots, we are back to where we started in 1990.

An era of exploitative mining, which will not balance the conflicting interests of affected

communities or environment and forests.

In conclusion, we would like to state that while we urgently need reforms and

therefore amendments in the MMDR ACT, 1957, but we need these for the right

reasons. The revisions must be brought about to make mining sector socially,

environmentally and economically viable. The MMDR Act 2015 does not measure up

to this challenge and it must be revised before it is cleared by the Parliament.

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