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Ministry for dilution of pro-poor clauses

The mines ministry wants to dilute the pro-poor provisions of the mines and minerals development (regulation) bill on the ground that it will make mining unsustainable.

delhi Updated: Jul 06, 2011 23:13 IST
Chetan Chauhan

The mines ministry wants to dilute the pro-poor provisions of the mines and minerals development (regulation) bill on the ground that it will make mining unsustainable.

In a proposal to be considered by a group of ministers (GoM) headed by finance minister Pranab Mukerjee on Thursday, the ministry wants to do away with 26% profit sharing clause and replace it with 26% royalty on mining.

The money collected from the mining companies will be given to district mineral foundation for carrying out development works for the locals affected by mining.

In a GoM meeting in December 2010, it was decided that mining companies will share 26% of their profit with the foundation but Planning Commission deputy chairperson Montek Singh Ahluwalia and steel minister Beni Prasad Verma opposed the decision.

Ahluwalia in a note to mines ministry said the move would "discourage future investment in mining" and will make the business unsustainable. He suggested that in place of profit sharing the scale of compensation to locals should be clearly laid down.

"More importantly, there is no guarantee that this expenditure will be additional since the state governments can divert resources they would have spend on the district to other areas," he said, while expressing reservation over the bill.

Agreeing with Ahluwalia, Verma in March 2011 said that calculating profit from an individual mine of a company will be difficult and the provision will not be implementable.

He also said that if the 26% profit clause is incorporated it will lead to import dependence as the domestic mining will become economically unviable.

Verma suggested sharing should be royalty based and the provision should be applicable to all sectors where companies acquire land.

The profit sharing clause had divided the GOM.

Three cabinet ministers Jairam Ramesh, P Chidambaram and Kanti Lal Bhuria wanted 26% profit sharing clause whereas opposed to Ahluwalia, Verma, commerce minister Anand Sharma and coal minister Shriprakash Jaiswal opposed it

Supporting the majority GoM view, the mines ministry in a proposal for GoM argued that the "profit calculation is difficult and accounts can be fudged".

It also said the money contributed in the district fund based on profit may be beyond the absorption capacity of the districts.

As per the ministry's estimate, five public sector mining companies will have to give Rs 3,666 crore every years to district mineral foundations. In case the royalty clause is accepted, the money will fall to Rs 1,200 crore.

"Earmarking funds based on royalty can also help in preventing illegal mining," the mines ministry said, while seeking the change in the proposed bill.

Other changes being proposed
The cess to be charged by the state and the Central governments should be halved to five% as against original provision of 10%

Reason: Modernization of state mineral directorates is because of local of will power rather than resources

Central government's permission to be mandatory for mining of 10 major minerals

Reason: To ensure important national resources are not over-exploited