A panel of ministers on Thursday approved a new bill calling for coal miners to share a maximum 26% of their profits with local communities, a government source said.
The source at the mining ministry added the draft law, which now goes to cabinet for approval, calls for other miners to give to local communities an amount equivalent to royalties.
The bill requires parliamentary approval after passing by cabinet to become a law. It will be applicable to new projects.
The draft law proposes the profit sharing formula in a bid to smooth land acquisition, a touchy issue in the countryside, where many oppose natural resources being carted away by outsiders. The bill had initially suggested all miners give 26% of profits to local communities.
A part of government moves to expand social programmes for the poor, the bill seeks to simultaneously please its core support base, block flows of new recruits to the Maoists and balance modern lifestyles against traditional ways.
While industry bodies are reconciled to sharing some profits, they have baulked at 26%, saying that will raise business costs too much and deter investors.
The mining ministry says that profit-sharing should make it easier for mining projects to win local approval and accelerate the pace of developments.
Years of protests, sometimes violent, have delayed many industrial projects, including South Korean steel maker Posco's plant in Orissa state, the biggest foreign direct investment in India at $12 billion.
India's mining sector has only opened up fully to private investors in recent years and state-run companies have lacked the funds and expertise to probe deeper than the top 50 metres or so where its iron ore and coal reserves are found.