Mining Bill aims at providing lifetime livelihood support for affected persons

NEW DELHI: The government has introduced a new provision in the draft mining regulation that will make it mandatory for companies to share a portion of their revenue for lifetime livelihood support to persons affected by mining.
According to people familiar with the development, a share of revenue will address the problem of fudged profit figures, as a section of the government thinks that companies might underreport profits to give a lesser share to the affected persons.

“The group of ministers which is finalising the draft (Mines and Minerals Development and Regulation) Bill has given an in principal approval to the proposal at the meeting held on September 17,” said one mines ministry official involved in the drafting process. “It will be part of the final draft of the Bill that will come up for approval at the next meeting,” he added.

ET had reported earlier that a revenue-sharing formula is being considered by the government to maximise benefit to land losers. It proposed that mining operations of companies will need to provide an amount equivalent to the royalty paid to state governments, in case the payout under profit sharing formula falls lower.

As royalty is largely a charge on revenue arising to companies from sale of minerals, the move is expected to provide sound compensation to affected persons, said the official citing the government’s view.

The earlier draft of the Mines and Minerals (Development and Regulation) Bill, 2010 had proposed provision of an annuity equal to 26% of the profit after tax, or allotment of 26% free equity by companies holding mining leases. While this provision has been retained partially, the compensation will now be 26% of profit or sum equivalent royalty paid.

Under the compensation formula, payment will be made by companies even where affected persons are not identifiable or in case of forest and other areas which may be uninhabited. “The aim is to create a pool of funds that provides compensation to land losers of new projects and also of mining operations which are closed or suspended,” said the mines ministry official.

It is proposed that funds collected from mining operations will go each year to a district mineral foundation where it will be pooled to ensure equitable distribution within the district. The minimum amount payable to affected persons will be the daily amount payable under NREGA. The Foundation will include representation from district administration, mining lease holders, affected people, Indian Bureau of Mines and district mining officers.

The proposed 26% profit sharing concept has been opposed strongly by mining companies who say it will render mining operations unproductive. While they favour a compensation formula linked to existing royalty system, mining companies are comfortable only to share an amount equivalent to 26% of royalty payout for each mineral category.

“Royalty-linked compensation mechanism will work better as it will ensure availability of funds on continuing basis and will be easy to calculate with revision as royalty rates are revised,” said Federation of Indian Mineral Industries secretary general R K Sharma.

“The proposal (for 26% profit-sharing) will be a deterrent in attracting investment to the mining sector,” says Siddharth Rungta, president of Rungta Mines, a company with large mining operations in Orissa. “Besides, it will incentivise people to remain unproductive as they get regular income without doing any work.”

The government is divided over the profit sharing formula with steel minister Virbhadra Singh favouring special consideration for PSUs such as SAIL and NMDC. “There is an immediate need for consensus building among stakeholders on key policy enablers like the proposed MMDR Act and the R&R (rehabilitation) policy,” said SAIL chairman C S Verma.