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Partners in profits

delhi Updated: Aug 09, 2010 23:15 IST
Prasad Nichenametla

"If things were allowed to continue, Karnataka, which is blessed with rich natural resources, would turn into barren land," Justice Santosh Hegde, Karnataka Lokayukta, said last year in his earlier report on illegal mining in Karnataka.

From the Niyamgiri Hills of Orissa to Bellary in Karnataka, mining and its associated aspects have been a scourge for people who have been living at the project sites for years on end.

The expanding mining industry is increasingly coming into conflict with people whose livelihood and habitations are adversely affected. For instance, the mining projects of Vedanta and Posco are facing stiff resistance in Orissa. The issue is politically sensitive, given the inroads the Maoists are making among such populations, mostly tribal.

To soften the blow that such activities can cause, a law has been proposed for spending 26 per cent of the profits out of every mining project on people adversely affected by it.

The group of ministers (GoM) deliberating on the draft Mines and Minerals (Development and Regulation) Act, 2010, is likely to reject the proposal of making project-affected people equity-holders in projects in favour of the one that mandates sharing profits.

The original proposal was that mining projects owned by individuals would share with the locals 26 per cent of the profits, and those of companies would give 26 per cent equity to them.

Government sources said industry chambers were lukewarm to the idea of giving equity to project-affected people whereas Home Minister P Chidambaram, a member of the GoM, had proposed profit sharing as being more beneficial. The new Bill will replace the 53-year-old law governing the mines and minerals of the country.

Finance Minister Pranab Mukherjee is chairing the GoM.

"The opposition from industry apart, the opinion is what practical use the shares, which anyway cannot be transferred, would provide the poor tribals," an official of the mines ministry said.

"So, we are seeking a change to the effect that the displaced would get continuous benefits year on year through sharing net profits of the mining company," the official added.

However, industry is holding out.

"(The proposal) will adversely affect industry and deter the flow of investments into the sector. It will make mining projects unviable," FICCI Secretary General Amit Mitra stated in his letter to the finance minister on July 16.

Instead, industry proposed one-time fixed compensation in accordance with Resettlement and Rehabilitation Policy.

The GoM is expected to meet this week and take a call on the proposal.

For companies that have not been able to show profit, the ministry has another proposal. Under this, it has to pay the project-affected people an amount equal to the royalty it pays the state government for the mineral extracted.

"The mining industry (has been) making huge benefits all the time; let it share some profits with the locals now," the source said.