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State of mining

The pressures built upon the Naveen Patnaik government through a combination of allegations of complicity and corruption in illegal mining and coal block allocations, continuing inquiries by the Shah commission and dissidence within the BJD seem to be taking a heavy toll on governance in Odisha. How else does one explain the spate of irrational orders recently put out by the state government for the regulation of mineral development and leases in the state?

Mining poses a bundle of contradictions in Odisha’s economy and society. It degrades the environment and affects local communities in the mining areas adversely. Mining is also seen as the source of illegal funding of the state’s politics and politicians.

At the same time, mineral development contributes to Odisha’s economic progress. In the past decade, Odisha achieved high economic growth accompanied by structural transformation of its economy. This has been fuelled by industry, particularly the manufacturing sector. In the dynamics of Odisha’s industrialisation, minerals and mineral development have played a crucial role.

Further, mining in recent years has made handsome contribution to the state government’s budgetary resources. Mining royalty collection, which hovered around annual figure of Rs 800 crore in 2005-06, had risen to nearly Rs 2,100 crore by 2009-10, which constitutes about 17 per cent of the state’s total revenue receipts.

Against this background, it is somewhat puzzling that the state government should now bring forward a set of revised and somewhat misguided policies and procedures concerning mineral development and leases that may spoil the growth-story. There are basically three strands in the government’s revised approach, all of which are at variance with the nationally accepted strategies and policies for mineral development.

First, the revised policy makes “captive mining” the core element of “mineral development” and on that basis, enunciates the rules and principles to regulate mining leases and renewals. The approach suffers from obvious conceptual flaws as the focus of “captive mining” is on the utilisation of extracted minerals, not on mineral development per se. Mineral resources development, on the other hand, should primarily be concerned with the exploration and exploitation of minerals and focus on resource efficiency in extraction and management. Mine closure, along with the associated reclamation and rehabilitation practices, is another important area. Such an approach would have led the state government to be concerned about scientific mining, improvement in mining technology and practices and sustainable development.

All these would result in a different set of rules and principles that would encourage the miner to adopt internationally-accepted sustainable mining practices and permit him to have long-term stake and security of tenure in his lease for a sound and healthy development of the mineral industry. An uncritical emphasis on the so-called “captive mining” has instead, resulted in the state trying to limit the area and period of lease or taking away a portion of the lease or putting hurdles for “second and subsequent renewals”.

The approach also contradicts the strategies and policies incorporated in the National Mineral Policy, 2008, and reflected in the five-year development plans and mining legislation. These provide that mining should be treated as an economic activity in its own right. Although value addition needs to be encouraged, it should go hand in hand with the growth of the mineral sector as a standalone activity. Value addition in states such as Odisha was negatively affected in the past because of freight equalisation and other distortion-creating policies. Now that these have been rationalised, large investments in mineral-processing industries will come up in mineral-bearing states on economic grounds, provided these states maintain a good investment climate, especially transparent government procedures devoid of institutional graft. Therefore, it does not stand to any reason as to why a state should adopt policies that go against sound economic principles and national strategies.

Second, in a throwback to the old “socialist” era, the state government has also decided to reserve/allot large mineral-bearing areas to the Odisha Mining Corporation (OMC) to ensure a fair and equitable distribution of minerals among the user industries. A ministerial committee has also been set up to formulate policy for the purpose. Despite being in existence for more than half-a-century, OMC has not yet been able to develop significant technical or professional capacity to undertake systematic exploration and exploitation of mineral resources. Out of nearly 35 mining leases that it holds, only four are in operation and that too through private contractors who indulge in selective and unscientific mining.

Finally, the state government has also tried to dig out the cases of so-called “deemed refusal” of the miners’ requests for renewals of lease that is supposed to have taken place during 1987-1994 because of its inability to take timely decisions and then suspend the operation of these mines although the rules have changed in the meantime to treat these cases as “deemed extensions”. Apart from causing disruption in mining activities, this retrospective action may not be strictly within the contours of law and may lead to litigation against the state government.

One suspects that the move is primarily aimed to hide the government’s own inefficiency in dealing with the applications for mining leases and renewals. It also exhibits its somewhat proactive stance when investigations are on by the Shah Commission into cases of illegal mining, which have the so-called “deemed extensions” as their subtext. There have been complaints that the state government just sits over the requests and takes somewhere between 10 and 15 years to make up its mind on renewal of mining leases.

It is thus clear that against the backdrop of continuing investigations into the allegations of illegalities in mining operations and the state’s regulatory inefficiency, a scam-scarred Odisha government has announced a set of measures that will have the effect of throwing the baby out with the bath water. Instead, it should undertake immediate course correction and align its policies and prescriptions with the national mineral development strategies.