| This is in addition to 26% of profits earmarked for displaced people, says consulting firm. |
Mining firms may have spend an additional one to two per cent of their net profits for social and environmental initiatives around their project areas.
This expense is not part of the proposed 26 per cent profit sharing with people displaced by projects.
The Government proposes to introduce a Sustainable Development Framework (SDF) for the mining industry as part of which the firms are expected to carryout initiatives for the social and environmental upkeep around their projects.
As part of the SDF, which has been drafted by the consulting firm ERM India, the mining firms are also expected to make periodical disclosures on such social and environmental initiatives.
“Companies would still have to take up softer social initiatives such as healthcare and medical services and education, among others. For such initiatives they might have to spend about 1-2 per cent of their net profits,” said Mr K.P. Nyati, CEO of Sustainable Mining Initiative, an outfit of the Federation of Indian Mineral Industries.
However, this expenditure would be in addition to the proposed profit sharing of 26 per cent, Mr Nyati said.
Flight of capital
As part of the new mining legislation, the Government proposes to make it mandatory for the mining firms to share 26 per cent of their annual profits with those displaced by the projects concerned. The industry has been opposing such a move stating that it was unviable for the mining firms and would result in flight of capital.
As an alternative, the industry has suggested a royalty-linked development fund for the benefit of those displaced.
Mr Nyati said the proceeds from the proposed 26 per cent profit share would be part of the Block Development Fund, which will take care of issues such as rehabilitation and infrastructure development, among others.
Mining companies currently spend about 3 per cent of profits on infrastructure development such as building of roads, schools and hospitals.
“Though this expenditure might come down once the new legislation comes into effect, companies might still have to spend 1-2 per cent of their profits on the softer social initiatives,” Mr Nyati added.
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