core sector communique

CSE welcomes the government’s proposal to provide 26 per cent of mining profits to local communities

Critiques industry’s reported reticence in sharing its profits
with project-affected people

• New Delhi-based NGO Centre for Science and Environment (CSE) says the provision of benefit-sharing envisioned in the proposed Mines and Minerals (Development and Regulation) Act, 2010 is the “first step towards repairing and repaying the damages done to poor communities living on mineral-rich lands”

• Criticises industry associations’ move to oppose this proposal. Calls it “unjust and untenable”

• Argues that benefit-sharing proposed by the Act is line with global best practices. Refutes industry’s contention that it will hurt the mining companies

New Delhi, August 21, 2010: “The Indian mining sector’s refusal to share its profits with local communities affected by mining practices is unjust and untenable and should not be entertained,” says Centre for Science and Environment (CSE), in response to a reported move by industry associations to scuttle the proposal of sharing 26 per cent of profits with tribals and locals. CSE has welcomed this provision, as envisioned in the proposed Mines and Minerals (Development and Regulation) Act, 2010.

The draft MMDR Amendment Bill provides for 26 per cent of equity or profits of mining companies to be given as annuity to project-affected people. Newspapers have reported that the country’s top industry associations – the CII, FICCI and FIMI -- have told finance minister Pranab Mukherjee that benefit sharing can hurt mining companies, discourage investment and drive down efficiency.

Hogwash, says CSE

CSE strongly refutes the claims of the industry associations. Chandra Bhushan, its deputy director, says: “In many mineral-rich countries, wealth from mining is being channelised into local development and shared with local communities. The provision of benefit sharing and local area development in the proposed MMDR Act, 2010 is, therefore, not new and in line with the global best practices. A number of mineral-rich countries have been following it for years without impacting the genuine profitability of their mining companies.”

The industry associations’ contention that sharing 26 per cent profits with local communities will put a very high economic burden on mining companies is, therefore, not true, he adds.

Even tiny Papua New Guinea does it: the Papua New Guinea Mining Act dictates that owners of private land will receive 20 per cent of the total royalty paid for mining leases on the land. In practice, the amount payable can reach even 50 per cent. South Africa’s Mineral and Petroleum Resources Development Act includes provisions that give local communities powers to benefit substantially from mining projects. And Peru follows a system of royalty tax, payable to the Central government, which is then distributed among local administrations and communities.

What mining is doing to people

India has, till now, shied away from benefit sharing. This has resulted in the country’s richest regions – holding most of its minerals – becoming the homes to its poorest people. Mining in India has, contrary to claims, done little for the development of the mineral-bearing regions of the country: says CSE’s 2008 publication, Rich Lands, Poor People -- Is Sustainable Mining Possible? 

The report finds that mining devastates both environment and livelihoods. According to it, between 1950 and 1991, mining displaced about 2.6 million people – and not even 25 per cent of these displaced were rehabilitated. For every 1 per cent that mining contributes to India’s GDP, it displaces 3-4 times more people than all the development projects put together.

It also says that forest land diversion for mining has been going up. So has water use and air pollution in the mining hotspots. Mining of major minerals generated about 1.84 billion tonne of waste in 2006 -- most of which has not been disposed off properly.

Says CSE director Sunita Narain: “These industry associations need to understand that unless the country can evolve an inclusive growth model, there will be no development at all.”

Adds Chandra Bhushan: “The provision of benefit sharing in the proposed Act is a proactive step and must be supported by all -- including the mining industry. After all, it is proactive provisions like these that will ultimately enable mining companies to obtain the ‘social license to operate’.”