District Mineral Foundations were set up to protect the interests of Adivasi communities who have borne the costs of mining. But they are flawed in their current form

Through 2011-13, dogged investigators from the Justice M. B. Shah Commission on illegal mining toured the rust-red villages, forests and rivers of northern Odisha, and trawled through reams of official records including from the environment, minerals, railways, and revenue departments. They met with underpaid mineworkers and affected communities. They questioned mining companies, who were mostly represented by well-heeled lawyers, including Pinaki Mishra, the State’s richest Member of Parliament, and representative of the Biju Janata Dal, the party ruling Odisha since 2000.

The stark conclusion of the commission’s 1,619-page report confirmed what Odisha, in particular its Adivasi citizens, has long known: “…there is no rule of law, but the law is what the mighty mining companies decide, with the connivance of the concerned department.”

Faced with the scrutiny of Justice Shah’s team, the State government’s belated admission that there were many illegal miners in Odisha took the form of 146 recovery notices. Issued in March 2013 to miners for illegally extracted ore, the notices added up to a whopping Rs. 59,203 crore, equalling a quarter of the State’s annual GDP. This is a sum large enough to pay Rs. 16 lakh to every single Adivasi family in Keonjhar and Sundergarh, the two districts hit by the scam.

Lessons to be learnt

Two years on, not a single rupee of this money has been recovered. The notices, and the larger issues of lawless mining, ecological damage and abuses borne by local communities remain buried under litigation and neglect.

The commission’s findings demonstrated that, left to themselves, the State-miners combine cannot be trusted to uphold public interest, and that decision-making in mining projects must yield to greater public scrutiny, in particular of local communities. But ongoing policy changes suggest that few lessons have been learnt.

Through an August 18 notification, Odisha has become the first State in the country to issue rules for the District Mineral Foundation (DMF) — an institution created by a March 2015 amendment through which the Narendra Modi government brought far-reaching changes to India’s mining regulations. The amendments primarily aimed at giving the State the power to auction vast tracts of mineral-rich forests and farmlands to mining corporations, and were not preceded by any inter-ministerial consultation with other relevant departments, such as the Ministry of Tribal Affairs (MTA).

DMFs are defined in the amendment as bodies that will work ‘for the interest and benefit of persons and areas affected by mining-related operations’. They are the State’s belated response to clinching evidence that citizens of India’s ore-rich areas, primarily Adivasi communities, endure degraded livelihoods and bear the social, environmental and health costs of mining, but get few benefits. In their current form, the DMFs are also flawed.

Five months after the amendment, there is no clarity on what percentage of revenues miners must contribute to the DMF. A 2011 bill drafted by the United Progressive Alliance government had mandated that mining companies pay to the DMF an amount equivalent to the royalty (currently fixed at 15 per cent of the value for a mineral like iron ore). The National Democratic Alliance government diluted this provision. The amended law now states that new lease-holders will contribute an amount “not exceeding a third of the royalty” to the DMF; existing lease holders will contribute an amount “not exceeding the royalty”. Effectively, the law specifies ceilings, but no floors.

Ore-rich States such as Karnataka and Odisha have since argued that new lease holders, to be decided through auctions, should contribute an amount equalling one-third of the royalty; existing leaseholders’ contributions should equal the royalty, given the “super profits” they earned through a decade-long mining boom. (To give an indication of their earnings, the Shah Commission had calculated that if the value of ore mined in just a single year, e.g. 2009, had accrued to locals, it would amount to a cash benefit of Rs. 4.5 lakh for every single family in Keonjhar and Sundergarh districts.) However officials at the Union Ministry of Mines have told the States these terms are unlikely.

Where the Centre draws the lines will determine whether a DMF in Keonjhar annually gets, say, Rs. 600 crore (going by a Centre for Science and Environment estimate, built on 2012-13 iron ore production figures). Or, simply, Rs. 200 crore. While mining associations lobby the Centre on keeping their contributions to the DMF to a minimum, there is no similar platform for other stakeholders outside government to voice their concerns. In fact, there is absolutely no transparency or disclosure from the Centre on how it is carrying out the decision-making process on this crucial issue.

Similarly, the Odisha government’s August 18 DMF notification was neither preceded by any public consultation exercise, especially in ore-rich districts, nor was a draft version of the rules issued to incorporate public feedback and review. Unsurprisingly, this opaque process has resulted in a DMF that centralises powers in the bureaucracy, and is cast as an executor of official-driven programmes. For example, the District Collector features on the DMF’s Board of Trustees, as well as its Executive Committee. This creates conflict of interest between the overseeing and implementing functions.

Worse, government officials dominate the DMF’s Board of Trustees, and constitute the entirety of its Executive Committee. Officials have the powers to prepare plans and budgets, sanction funds, award contracts, and if they deem appropriate, even use DMF funds for projects at the block and district level, thus bypassing remote Adivasi villages in the forests and mountains witnessing mining.

It is alarming how, despite local communities being the hardest hit by mining projects, the institutional framework created by these rules entirely sidelines public participation and local knowledge as elements crucial to building an effective DMF. The only allowance the rules make is the provision of gram sabha approval for decisions of the DMF in scheduled areas. However, officials have prepared the ground for reducing this to a token by not detailing what the approval process will entail.

In this overly centralised structure, communities can neither plan nor authorise tasks, which they believe the DMF should undertake. They cannot even conduct social audits of projects carried out in their name — in fact, the only audit the notification specifies is an internal one.

Ironically, the Union Ministry of Mines’ own 2011 document on ‘Sustainable Mining’ conceptualised the DMFs as bodies with project-affected, community and civil society representation, and a more expansive public role. This included building the capacities of Adivasi co-operatives in line with the Samata judgement on mining in scheduled areas, providing affected communities with monitoring powers on existing mines, enabling informed participation in consent processes, and holding periodic district-level consultations on the impacts of mining, with the involvement of key policymakers like the MTA and the Ministry of Environment and Forests.

As the Shah Commission’s reports outlined, mineral-rich areas are afflicted by a severe asymmetry of power between local communities and the State-miner combine. Ongoing policies are widening this inequity, and reinforcing the harmful approach that Adivasi lands are, first and foremost, a site for resource extraction.

(Chitrangada Choudhury is an Odisha-based multimedia journalist and researcher, and a Fellow with the Open Society Institute. Email: [email protected])