The Draft Mineral Policy is designed to promote narrow interests of miners and their lobbies

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Representation to Veena Kumari Dermal, director, Director, Ministry of Mines, Government of India, on the draft National Mineral Policy (NMP) 2018 by Dr Claude Alvares, director, Goa Foundation:

This letter is written in response to the draft National Mineral Policy 2018, uploaded on the Ministry’s website on 9.1.2018. The Goa Foundation participated in the work of the committee that was set up by the Ministry of Mines to oversee preparation of the draft. We are therefore not a little surprised to see some significant changes from the last draft circulated before the committee. Hence these comments which we hope the Ministry will consider.

Before we go into the merits of the draft notified, it would be useful to reiterate the context within which the Mineral Policy of 2008 is sought to be reviewed within the span of just a decade.

In the SC judgment in the Odisha mining case, the SC discussed intergenerational equity at some length before directing the present review of the policy. The SC was also dismayed that the existing (2008) mineral policy “seems to be only on paper and is not being enforced perhaps due to the involvement of very powerful vested interests or a failure of nerve.” It therefore directed the government to announce “a fresh and more effective, meaningful and implementable policy.” The SC went on to direct a fresh look at the policy “particularly with regard to conservation and mineral development.”

Obviously, a major overhaul of the existing policy was intended by the Government when it set out on this new exercise in 2017.

Unfortunately, the notified draft does not actually provide an adequate enough response to the issues raised in the Supreme Court’s order. This is despite the fact that a review of the 2008 Policy provides a magnificent and unique opportunity for you and your government to set things right. I am writing to try and persuade you not to miss this historic opportunity to put mining on a sustainable footing – which would be of utmost importance to the national economy – in addition to ensuring it is “intergenerational equity compliant”

Draft policy highlights that need to be commended:

We are happy to note that the present draft notified for objections/suggestions includes the following salient principles for sustainable mineral wealth management which are not in the 2008 National Mineral policy:

  1. It observes that natural resources, including minerals, are a shared inheritance. This acknowledges and reiterates the constitutional position that natural resources are owned by the people of the State.
  2. The State is merely a trustee of these natural resources for the people and also future generations (Public Trust Doctrine). State is not the true or real owner.
  3. States must ensure recovery of full value of the ore transacted, which means they must ensure zero-loss mining of what are essentially publicly owned resources.
  4. There is a need to cap mineral resource extraction from point of view of making such resources also available to the next generations and from the environmental point of view.
  5. Information about mineral resources is “a public good” as it deals with publicly owned resources and therefore will be made available to the public who are its owners in a transparent manner and not just to investors or those involved in mining for a profit.
  6. The draft notification introduces the idea of “no-go” areas, so that potential conflicts between those who are allowed to prospect for minerals in forest and ecologically sensitive areas and the forest department at the time of lease grant do not arise.
  7. The introduction of “Make in India” perspective and the idea of ensuring “Mineral Security” are both welcome. Both ensure that minerals are used for the economic development of the country and not solely for profit.

The point to underline is whether the above aspects relating to intergenerational equity will protect the rights and interests of future generations? We think that while the above proposals are necessary, they are not sufficient. It is almost as if the Government has had a failure of nerve at this stage, and does not want to go the whole mile for ensuring “an effective, meaningful and implementable policy.” We hope you will consider what we are suggesting and make appropriate changes. Otherwise we are simply cheating the coming generations of their inheritance.

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Policy highlights that remain in the grey area, requiring clarification/modification or improvement

We regret that important aspects of sustainable mining and intergenerational equity have not been included in the said draft and we are most anxious that these are imported into the document in some manner as the final notification will be providing a much needed direction for improved handling of minerals for at least another decade:

  1. The draft NMP 2018 states: “Conservation of minerals shall be construed not in the restrictive sense of abstinence from consumption or preservation for use in the distant future but as a positive concept leading to augmentation of reserve/resource base.” This is unchanged from NMP 2008. There has been no advance.
  2. While conservation is not the same as preservation, augmentation of a reserve cannot be considered “conservation” in any interpretation of the term under the MMDR Act.
  3. Conserving the value of the mineral capital for future generations following the intergenerational equity principle is aaf conservation that is entirely missing from the policy. In our humble suggestion, conserving minerals or conserving the value of the minerals mean almost the same. If we are unable to conserve the minerals, we are duty bound to conserve their value. Either the minerals or the value of extracted minerals should be available to future generations.
  4. Thus, we would like to insist that the idea of conservation of minerals should also include conservation of the value of the minerals in the form of permanent or sovereign funds. When 50+ countries in the world (and now State of Goa) are setting aside the value of their natural resources in such funds, we wonder why India too cannot do the same. At least, a good reason should be provided to indicate why our country refuses to invest the economic value obtained from sale of our natural resources in such funds, which is the only significant best practice today of ensuring intergenerational equity, since the minerals themselves are being steadily depleted and therefore lost.
  5. Thus, use of the mineral receipts is an issue that is completely ignored in the draft. Saving everything, sharing the income, capital treatment of mineral receipts, accounting on the public trust account, creation of permanent funds & paying the citizen’s dividend – serious proposals made by the Goa Foundation since we are after all dealing with publicly owned resources – have been completely ignored.

Need for focused research into minerals

The Policy must have a stronger section on indigenous research by those involved in mining, both public and private sector. Only the public sector is presently doing some research into minerals and mineral processing (including CSIR) but this is still inadequate. With a few exceptions, most of the private mining industry players are continuing  to freeload on the backs of public sector research. Appallingly, the government appears to support such sponging.

Despite the report of the Standing Committee on Coal and Steel (2012-13) (15th Lok Sabha, 38th Report) on “Review of Export of Iron Ores Policy”, we are still peddling the argument that India does not have the type of furnaces to deal with low grade iron ores and hence the export of these ores should be permitted – instead of ensuring that indigenous capability to improve such ores and utilize them in Indian iron and steel plants is distinctly enhanced. The National Mineral Policy should not be subordinated to the demands of those who have developed a vested interest in export of minerals. The Make in India policy should effectively rule out such kinds of exports. However, little thought appears to be given to how this new emphasis on Make in India reconciles with the continuing practice of exporting such minerals, often at depressed or ridiculous prices, despite the real fear of their impending scarcity.

Hard message needed on illegal mining

We need a strong section to be included reflecting the position of the State on illegal mining. The present draft does not discuss this issue except in generalities (2.3 and 2.4), nor does it announce absolute intolerance of illegal mining. This is strange considering that illegal mining has repeatedly brought the sector to its knees in the past 5 years, affecting economic and industrial output. Existing regulatory measures appear inefficient to control such mining practices. It appears that in respect of illegal mining, this policy has nothing new when compared to 2008 and will remain a paper tiger.

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Implementation plan is missing

The existing NMP 2008 states: “3.2. The Central Government in consultation with State Governments shall formulate the legal measures necessary for giving effect to the new National Mineral Policy, 2008, to ensure basic uniformity in mineral administration across the country and to ensure that the development of mineral resources keeps pace and is in consonance with the national policy goals. The MMDR Act, the MCR and the MCDR will be amended in line with the policy. The regulation of mines and development of mineral resources in accordance with the national goals and priorities as spelt out in the policy and the legal framework shall be the responsibility of both the Central and the State Governments.”

Despite these assurances in the old policy, the SC found that “it seems to be only on paper and is not being enforced perhaps due to the involvement of very powerful vested interests or a failure of nerve”… One would expect that additional implementation and effectiveness aspects would be incorporated such as:

“An implementation plan for the policy recommendations will be drawn up within 3 months from the policy being notified. Supporting metrics for measuring progress in implementation will be developed such as mineral output and loss rates. A task force will be set up to monitor the implementation of the policy. The task force will meet at least every quarter. An annual report on the implementation of the policy will be placed before parliament. The CAG will be asked to perform a periodic performance audit on the implementation of the policy.”

Incredibly, the draft NMP 2018, contrary to the SC directions, takes a massive step backwards – it has eliminated even the existing Section 3.2 providing for subsequent actions!

Impact of corruption on economy through mining

The succession of failures in mining in India – that has led to a succession of landmark judgements from the SC – can be attributed to a single factor: rent seeking and crony capitalism. As the Shah Commission noted of Goa mining:

“It is pertinent to state here that such illegal acts can’t happen without connivance of the politicians, bureaucrats and lessees. There is a complete collapse of the system.”

This nexus has been found in other states as well. However, there seems to be no effort in the policy to reign in corrupt politicians and bureaucrats. This aspect has been completely ignored. The ongoing corruption from mining is a huge drag on the economy. World Bank research shows good governance leads to a 300% increase in per capita income in the long term. Most of our large scams have involved natural resources. The corruption is leading to political capture & poor governance. It is also behind our civil war and much of our environmental issues. It is a driver of our galloping inequality and our persistent extreme poverty. The principles we are advocating will make a significant dent of corruption, which is sorely needed.

As is apparent, control over corruption cannot be left only to the bureaucracy. Radical transparency is a critical aspect so that ordinary citizens can audit for themselves how their mineral inheritance is being managed. This view is bolstered by the prominent role played by private citizens and NGOs in uncovering & prosecuting many of the mining scams.

We would like to draw your attention to the recent study “Many ways to lose a billion” by Publish What You Pay – Canada. A recent study by Transparency International Australia has identified 140 “Corruption Risks and Ways to combat them in the Mining Approval Process.” This is only in the first stage of the process to convert minerals into financial capital. The reports of the Karnataka Lokayukta, the Shah Commission, the Central Empowered Committee, the CAG identify numerous other lapses in the process of mining. The SC in the Odisha mining case proposes to appoint an Expert Committee to identify the lapses that have taken place and measures to prevent its recurrence.

Elimination of zero waste as a priority

Another way the draft policy tries to increase ineffectiveness is to lower the standards required of the mining industry. For example, zero-waste mining would logically form part of conservation and mineral development. Disappointingly, zero-waste mining is no longer the national goal (See 2.1 in NMP 2008). This is a step backward. The Supreme Court asked the Ministry of Mines to go forward, not backward.

Sustainable Development Framework

Likewise, the Sustainable Development Framework has gone from being mandatory in the existing policy to being simply a benchmark in the present draft. While the draft policy adopts some of the key aspects of the existing Sustainable Development Framework, it suspiciously omits: “Also one based on creating long-term, genuine, mutually beneficial partnerships  between government, communities and miners, based on integrity, cooperation and transparency.” Even the last draft of the NMP discussed at the K R Rao Committee showed more commitment to sustainable development.

And whatever happened to best practices?

India aspires to be a world leader in many aspects of modern economy and we support this aspiration. World leadership, however, includes redefining the frontier of global best practices. Global best practices in mining include membership of EITI & the WAVES partnership, and practices like Open Budgets, Open Fiscal Models, Open Contracts, Open Data, Mandatory Disclosure of payments to governments, Beneficial Ownership Registries, registry of interests for politicians, mineral chain control systems, Tax Base Erosion and Profit Shifting (BEPS), Free Prior Informed Consent (“FPIC”), etc. Surprisingly, there is not even a mention of “best practices”, let alone a vague aspiration to implement any of these standards. These are best practices, not worst practices. Governments implement best practices because that helps the nation. The timidity is disappointing.

Conclusion

The SC was dismayed that the existing (2008) mineral policy “seems to be only on paper and is not being enforced perhaps due to the involvement of very powerful vested interests or a failure of nerve.” It therefore directed the government to announce “a fresh and more effective, meaningful and implementable policy.” We have a civil war being waged in Central India over minerals.

The present draft is designed primarily to promote the narrow interests of the miners and their lobbies. In the State of Goa, where only private interests are involved in mining, several commissions of inquiry found more corruption and looting than in those states where public sector dominates. So let us not assume private investors will provide a new mining heaven. The interests of other stakeholders, the people on the ground, affected communities, as well as the owners of the minerals (the citizens of the state) and future generations should be taken more seriously.

Inter Governmental Forum (IGF) review of the draft

India is a member of the Inter Governmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF). “The IGF’s overarching objective is enhancing capacities to achieve sustainable development objectives through good governance in the mining sector. This effort is largely framed by its flagship Mining Policy Framework (MPF), which sets out concrete objectives and processes for good governance. Members are committed to reviewing and updating this tool on a regular basis.”

“As a non-binding policy guidance tool, the MPF lays out international best practice in these six key pillars of mining law and policy:

  1. Legal & Policy Environment
  2. Financial Benefit Optimization
  3. Socioeconomic Benefit Optimization
  4. Environmental Management
  5. Post-Mining Transition
  6. Artisanal and Small-Scale Mining.”

A comparison with the draft NMP 2018 shows its inadequacy on almost all these pillars. The IGF has already completed mineral policy assessments for Suriname, Mongolia, Senegal, Uganda, Madagascar and Dominican Republic. As India is a member of the IGF, we strongly recommend that the Government refer this draft National Mining Policy 2018 to the IGF for review as well.

Posted in Law

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