Fair Sharing of Mining Revenue for the Tribals

Fair Sharing of Mining Revenue for the Tribals

Indian states with large mineral deposits show low per capita income with high prevalence of poverty. A study conducted by Centre for Science and Environment (2008) had established the fact that of the 50 major mining districts, 60% figure among the 150 most backward districts of the country. Four of these mining districts— two from Odisha and one each from Jharkhand and Chhattisgarh –are among the top 25 backward districts of the country. 13 of these districts figure in the top 50 backward districts of the countryi

During the year 2010-11, mineral production was reported from 32 States/Union Territories of which the bulk of value of mineral production of about 90% was confined to 11 States (including offshore areas) only. Odisha had the biggest share of nearly 10.6 % of the total value of mineral production in the country followed by Rajasthan (8.6%), Andhra Pradesh (7.8%), Jharkhand (7.7%), Chhattisgarh (6.6%), Gujarat (6.3%), Madhya Pradesh (5.3%), Assam (4.6%), Goa (3.5%) and Karnataka (3.3%). The remaining 21 States/Union Territories had individual share of 3% or less than 3% and all together accounted for 10% of total value during the year under reviewii

Paradoxically, states like Chhattisgarh, Jharkhand and Odisha with significant contribution to the country’s total mineral resources have poverty rates of about 48%, 42% and 50% respectively, which is higher than the national average of 29.5 % iii. This is despite the fact that a major chunk of revenue in these states come from mineral royalty. A clear indication that this royalty money has not been channeled towards the uplift of the people in the state, especially those affected and displaced. For instance, Odisha during 2001-02 collected Rs 379 crore as royalty from mining. This increased 15-fold by 2016-17 to Rs 6,720 crore. These mining royalties, in 2001-02 contributed to 54% of the state’s total share of non-tax revenues. This has only increased in the subsequent years. During 2011-12 and 2012-13, the share reached 71%; in the current year it is estimated to touch 68%. In comparison, the revenue from other sources ivduring the last 15 years has seen only a less-than 10 fold jump; it has grown from Rs 318 crore in 2001-02 to Rs 3103 crore in 2016-17v.

  Mining Revenue for the Tribals

This spectacular rise in the mining royalties can be attributed to the fact that the State and the Centre encourage mining companies to set up their exploration units in the mineral bearing districts. This has particularly been the trend in the last 15 years. By the end of 2014-15, 419 diversion proposals covering an area of 44,351 hectares of forest land were approved by the Ministry of Environment and Forest (MoEF) for non-forest use. Out of these 164 (39%) proposals are under mining sector with an area of 20,265 hectares (46 %)vi . These mines are in forest areas that are largely inhabited by the Adivasis. The trend indicates that the state is generating revenue from the mining sectors at the cost of livelihood of the Adivasis who, for generations, have lived sustainably in these forests. These royalties have never been traditionally used for the development of the communities. 

 As a crucial step towards initiating fair sharing of revenue for the tribals, the current government set up a District Mineral Foundation (DMF)vii The DMF ensures that a share of mineral revenue, collected from the mine leaseholder, be used for the development of the affected communities. As per the DMF rules, the foundation will get up to one-third of the royalty amount; 30% of royalty will be collected from leases not granted through auction and 10% of royalty will be collected from leases granted through auction. 

The Centre as well as the State government have constitutional powers to collect resources through various tax and non-tax sources. The priorities and intentions as well as targets of expenditure of these resources are decided by the legislative body. The resources of DMF are routed outside the budget and is managed by the district level officials. The DMF is formed under a Trust Act in which the Collector or the Revenue Divisional Commissioner is the chairman supported by other members who are either government officials or political representatives. Since it does not come under the purview of the legislative discussion, expenditures under DMF are likely to be influenced by the powerful state and district political representatives, leaving no scope for discussing on the floor for either its rationale or its viability. 

It is thus crucial that the DMF stays on its course. DMF is a supplementary resource and it needs to be utilised, in addition to the existing budgetary provisions made by the state government. The resources are meant to address the water, health and education needs of the affected communities.

On March 26, 2015, the Parliament approved the enactment of DMF through The Mines and Minerals (Development and Regulation) Amendment Act, 2015. The rules of the DMF are framed by the concerned state governments. The Central government, through the powers vested in it u/s 20A of the MMDR Act, 1957, directed the concerned State governments to incorporate the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) into the DMF rules. 

Odisha framed its rule on August 18, 2016.  It is estimated that in this mineral rich state, Rs 2,240 crore will be deposited in the DMF (assuming that one third of the royalty to the mining companies will be deposited in the DMF resources) during the financial year 2016-17. By March 2016 the state government had collected only Rs 90 crore under the DMF. This could be attributed to the fact that the systems and the processes to administer the DMF were still at a very nascent stage. However, in August 2016, the state accelerated its collection for the DMF and secured Rs 1,100 crore viii.

In Odisha, 10 districts are rich in Chromite, Coal, iron ore, manganese and bauxite, and most of these districts have high proportion of tribals. The DMF funds have to be appropriately utilised for the benefit of the affected communities, but the ground realities are quite different. Though it’s too early to assess the effectiveness of the spending of DMF fund, the planning and governance process initiated in some of the districts raise questions on the intentions of using the funds for the affected communities living in and around the mining areas. 

Let’s take the case of Keonjhar district in Odisha, one of the mineral rich districts in the state. The first DMF meeting was held on February 2, 2016; this was an introductory meeting regarding the formation of board of trustees and other operational modalities. The second meeting held on May 31, 2016, discussed the amount collected for DMF and spending priorities. It was found that till May 2016, the amount collected for the district was Rs 280 crore and an additional amount of Rs 150 crore was estimated to be collected in the coming months. In the meeting, a total of 11 proposals were discussed out of which 10 proposals were road projects and one was for setting lighting facility in Keonjhar Municipalityix

It was clear that the real needs of the mining affected communities like strengthening of livelihood, health and education facilities had not been prioritised by the DMF. In another instance, earlier this year the DMF committee approved building a medical college at a cost of Rs 55 crore in Keonjhar district.  

These instances indicate that the resources from DMF runs the risk of becoming a financial back up plan, over and above the MLA and MPLAD funds, for the political representatives to fulfil the electoral promises and for the state to adjust the funds into their state planned expenditure. The Odisha State DMF rules, thus, have to be strictly followed and monitored. 

The Rules mandate that high priority areas such as drinking water supply, environment preservation and pollution control measures, health care, and education are to be undertaken through the DMF. It needs to have an assessment of the existing provisions and accordingly the amount needs to be spent keeping view of change in the life of the affected communities. The state cannot possibly do all of this on the existing human resource and expertise. It will have to deploy adequate experts for long term plan and implementation of such kind of resource. 

Further, the DMF should have separate planning mechanism with opportunity for integration with the mainstream planning process of the state. As per rule, at the district level, there will be two meetings per annum in which the priorities of the spending will be decided. In fifth schedule areas, the plans which will be implemented should be approved by the Panchayat bodies i.e. Gram Sabha.

The current structure and planning process of the DMF shows that there is a lack of backward linkage to gather people’s expectation on the ground. Evidences from Keonjhar shows that the decisions on priorities of spending are taken at district-level meetings headed by the collector. Community consultation for assessment of the needs of the target group was absent. Thus, there is very little space to incorporate peoples need in the overall planning of the affected areas. DMF planning has bypassed the decentralisation process at the grass roots level and created another parallel structure. 

Instead of a top down approach where planning is done at the district level and then endorsed by the Panchayat, the reverse should be done. A bottom up approach should be adopted that begins with due planning at the ground level. A planning mechanism at the Panchayat level is already in place. As per the three-tier Panchayati Raj system, the development plans are made at the Panchayat level which is further consolidated at the Panchayat Samiti (Block) and district level. The District Planning Committee is the final approval body at the district level to prioritise the needs of the communities gathered through Gram Sabha. 

Although the DMF looks like a progressive action by the current Union government which ensures share of the affected communities, especially the Adivasis, in the mineral income, it is not integrated with the Panchayat. As a result, it will have difficulties in functioning and working for the affected communities. This amount can be a great support for the mineral rich and poverty-stricken states to formulate appropriate actions for the development of the affected communities. However, this has not caught the attention of development practitioners, experts as well as media and members of the legislative body to have informed debate around the gaps in the governance and planning mechanism lies with the DMF. This may lead to diversion of such huge resources to other inappropriate areas. Thus, the need of the hour is to bring the DMF on to the discussion table and in everybody’s line of sight.  


Written by Pravas Ranjan Mishra- Programme Officer, Bhubaneswar, Oxfam India   


Bhushan, C. and Hazra, M.Z. (2008): Rich Lands Poor People: Is Sustainable Mining Possible Centre for Science and Environment, New Delhi,

ii mines.nic.in/writereaddata/UploadFile/Statewise_Mineral_Scenario.pdf

iii ‘Report of the expert group to review the methodology for estimation of poverty’, Government of India Planning Commission, November, 2009

iv Other Non-Tax Sources include Interest Receipt, Dividends and Profits, Forestry and Wildlife royalty, Receipts from Departments through fees, Major and Medium Irrigation and Tariffs

v  ‘Budget at a Glance for the years 2001-02 to 2016-17’, Department of Finance, Government of Odisha 

vi ‘Odisha Economic Survey 2015-16’ , Department of Planning and Convergence, Government of Odisha, 2016

vii http://odishasuntimes.com/2016/03/11/odisha-govt-collects-rs-90-cr-under-district-mineral-foundation/

viii http://timesofindia.indiatimes.com/city/bhubaneswar/Odisha-raises-Rs-1100-crore-under-District-Mineral-Foundation/articleshow/53670296.cms

ix Resolution document of the DMF meeting collected from Keonjhar 



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