Stop the Corporate Loot of Mineral Resources!
Nationalise Minerals, Oil, Gas !
[With the court battle between the Ambani brothers over natural gas, the Madhu Koda scam in Jharkhand, the recent crisis in which the Reddy brothers (owners of private mining companies) brought the Karnataka Government to its knees, and exposure of widespread illegal mining in Karnataka, AP, Chhattisgarh and Orissa, the issue of corporate loot of the country’s precious resources has come to the fore.
In mineral-rich states all over the country, corporate players are cornering the country’s minerals for private profit. Government policy has moved steadily towards undermining the public sector, rolling out the red carpet for private corporations and MNC miners, and facilitating export of mineral resources. The regions which are richest in minerals are home to the poorest people, who are not only deprived of any share in or benefit from mineral wealth, but are evicted from land, forests and means of livelihood to boot.
The following is a fact-sheet for a campaign to be undertaken by the party in all mineral-rich states. Many of the facts and figures are courtesy Rich Lands Poor People, a Citizen’s Report published by the Centre for Science and Environment in 2008 as well as inputs from Radhika Krishnan. Cartoons courtesy Khalil Bendib, www.corpwatch.org- Ed]
Opening up Mining for Private Loot
As indicated by the report of the NPC (see box), on the eve of India’s Independence, mining by private players for profit and export was seen as a mark of colonial exploitation and nationalisation of mining was recommended as a key element in the shift to a national economy. Since 1993, governments have worked to reverse this policy thrust. Many policy changes are underway to liberalise and privatise the Indian mining industry.
Increasingly, a powerful corporate lobby is pushing for mining to be delinked from industrialisation and oriented towards export; and for small-scale and public sector mining (which provide mass employment) to give way for large-scale, mechanised mines owned by private players.
The government formulated the National Mineral Policy (NMP) in 1993. This Policy was the pretext for a series of measures in succeeding years to open up the sector to the private sector and FDI.
• Thirteen major minerals, earlier reserved for the public sector, were opened up to the private sector.
• Foreign equity ventures in joint ventures promoted by Indian companies, foreign technology and foreign participation in exploration and mining was allowed and encouraged.
• The Indian Govt. divested its equity holdings in a number of public sector undertakings such as Neyveli Lignite Corporation, NMDC, Kudremukh Iron Ore Co. Ltd., Hindustan Copper Ltd., NALCO and Hindustan Zinc.
• NMP 1993 allowed FDI up to 50% (Mineral concessions had hitherto been restricted to companies with less than 40% foreign holding) with additional FDI on a case-to-case basis; with all FDI proposals requiring clearance by the Foreign Investment Promotion Board.
• With a view to encouraging private sector investment and FDI in exploration and prospecting, the Large Area Prospecting License (LAPL) was introduced in 1996 to enhance the area for a single Prospecting License from 25 sq km to 5000 sq km; a single entity would be allowed to hold up to 10000 sq km in the entire country.
• In 1997 FDI up to 50% was taken out of the purview of the FIPB and granted automatic approval.
• In 2000 FDI was allowed up to 74% under the automatic approval route
• In 2006, 100% FDI was allowed in mining
• The Coal Nationalisation Act 1973 was amended in 1999 to allow entry of private players in coal and lignite (hitherto coal had been a state monopoly barring captive coal mines granted to TISCO). The Economic Survey 2005-06 had suggested liberalisation of the coal sector including bidding of captive blocks and permission to sell excess coal from captive mines.
• Amendments were made in the Mines and Minerals (Regulation and Development) (MMDR) Act, Mineral Concession Rules (MCR) and Mineral Conservation and Development Rules (MCDR) in 1999-2000. The MMDR Act has been amended four times since its promulgation in 1957 followed by corresponding changes in MCR and MCDR; the changes introduced in 1972 and 1986 increased government control and excluded the private sector; those introduced in 1994 and 1999 did the opposite.
• The Hoda Committee headed by Planning Commission member Anwarul Hoda recommended further changes to facilitate private investment in mining and loosen the norms for environmental clearance
• NMP 2008 opened up prospecting and exploration of ores to venture capital in a big way: “the private sector would in future be the main source of investment in reconnaissance and exploration.” It shows the influence of the mining lobby pushing to orient the industry towards export: “To develop mining as a modern stand alone industry, substantial investment is required. Assurances on export of minerals will be a key factor for investment decisions particularly on FDI in the sector.” Risk investment in survey and prospecting, joint ventures and Public Private Partnerships are the clear mandates of the policy. It also pushed for more mechanized, less labour-intensive mining, where the industry will largely depend upon “skilled” labour with a high level of technical competence, and will therefore provide less employment.
Mining in India was traditionally dominated by the public sector, but that is rapidly being changed. Coal continues to be nationalised but the private sector is now allowed to hold captive mines and sell coal. Now, further changes are proposed in the MMDR Act to fast-track mine licensing and introduce structural reforms in the coal and mining sector, faster allocation of coal blocks to private players and inviting more private investment in the sector. Players like Reliance are having an increasing share in petroleum and natural gas, and the public sector is losing ground to private in natural gas. Copper, lead, zinc, and gold have all been opened up for private investment. Private sector now dominates mining of iron ore, bauxite, chromite, limestone, silica and mica. A considerable part of limestone is under captive control of the cement industry.
Lobbying for Export-oriented Mining
The share of exports of iron ore to the total iron ore production in the country has increased from 26% in 2000-01 to 58% in 2005-06. The surge in iron ore mining in recent years in India has largely been to feed the insatiable Chinese demand for iron, with most of the incremental production of iron ore in India being exported. China’s share in India’s exports of iron has increased from about 30% in 2000-01 to 83% in 2005-06. India’s domestic requirement of iron ore today is not even 40% of the iron ore produced; China consumes far more of Indian iron ore than India’s own domestic industry. Goa, Koenjhar-Sundergarh in Orissa, Bellary-Hospet in Karnataka – the frenzied mining of iron ore in these regions is all oriented towards export.
The direction of change in the Indian Government’s mineral policy seems dictated by the demands of a vocal and influential mining lobby of corporate mining interests.
Guy Elliot, Finance Director of mining giant Rio Tinto, while addressing the India-UK Business Leaders’ Forum in 2006, outlined a blueprint that he expected Indian Planning Commission member Anwarul Hoda to deliver in the report of his Expert Committee:
“Unfortunately, here the Indian mining code stands in the way of progress, as we have made comprehensive submissions but have to wait for the right licences and permits to be granted. As you would expect, these delays do not encourage foreign direct investment.”
What changes did Elliot demand in India’s mining code? Posing the question “What should India do to make itself more attractive to foreign direct investment in the minerals sector?”, he proceeded, in answer, to demand “security of tenure” for the miner; “guaranteed progress through the approvals process” that should be “both speedy and transparent”; “a stable fiscal regime”; “free access to markets, prices and free market competition for their product.”
Directly demanding export-oriented iron-ore mining, he challenged the “perception in India that iron ore resources are limited and should therefore be reserved for domestic use.” He also disapproved of the policies of some state governments that allocate “captive” leases to those companies prepared to commit to invest in downstream assets.”
The Federation of Indian Mineral Industries (FIMI) too had prepared a “study” in 2008 (titled “Creating a Vibrant Iron Ore Industry in India) that pushes for delinking iron ore mining in India from its “subservience” to the domestic steel industry, and developing it instead as an “independent” export-oriented industry. The FIMI study also opposes proposed increases in royalty and export duty. The FIMI wants the freedom to sell iron ore at top international prices; they are willing to sell to Indian steel manufacturers if the latter are willing to pay international rates.
While the FIMI calls for a ban on captive iron ore mines, the Indian Steel Association (ISA) has called for a complete ban on exports. The production of each tonne of steel creates seven to ten times more value-addition than iron ore mining alone, and steel production along with iron ore mining can create five times more direct and permanent employment than mining alone.
The Hoda committee, in this debate, sided with the mining lobby, recommending that there is no need to impose any quantitative restrictions on exports.
Illegal Mining: Privatisation by the back door
The vast illegal mining empires in Karnataka and Andhra Pradesh commanded by Reddy brothers, and similar tracts of illegal mining in other states are not isolated aberrations. Their existence would not be imaginable without a high degree of collusion between governments and the mining syndicates. Illegal mining is really a sort of covert privatisation – whereby a free hand is given to the mining syndicates to bypass the laws while governments turn a blind eye. Essentially the surge in illegal mining in places like Karnataka is to export iron ore to China - in violation of MMDR Act, Forest Protection Act and many other laws. There have been literally thousands of cases of illegal mining in many states (see Table).
Following the Koda scandal and the naked display of power commanded by the Reddy brothers over the Government and MLAs in Karnataka, as well as the exposure of their linkages with senior Congress leaders and even the former CM of AP, the late YSR, the Central Government as well as state governments have been under pressure to show some action against illegal mining.
Illegal mining robs the exchequer of thousands of crores in lost royalties – and the mining companies are literally robbing the country of its mineral wealth, all with the cooperation and tacit approval of the very institutions meant to implement the mining laws.
Take one instance of the Reddy brothers’ companies. Iron ore mining leases were granted by the Mysore Minerals Ltd. (a state government undertaking) to the Obulapuram Mining Corporation (OMC) and Anantapur Mining Corporation – owned by the Reddy brothers (both of whom are Ministers in the Karnataka Government). A report by the Karnataka Lok Ayukta (which was probing instances of illegal mining between 2000 and 2006 in Bellary, Chitradurga and Tumkur districts) has asked how come the OMC was allowed to export iron ore from mines in Obalapuram when these mines are supposed to be captive for a proposed steel plant in Cuddapah district of AP?
The Orissa government has instituted a probe by its vigilance directorate into cases of illegal mining in Orissa and has opposed the CBI’s offer to probe illegal mining in the state. Work in 125 mines has been suspended. It remains to be seen, however, if any action is taken against the government functionaries that allowed the illegal mining to take root in the first place. Take the case of illegal mining by the Rungta group in Keojhar: The MoEF in a letter on December 18, 2006 had informed the state government about illegal extraction of ore in six large iron and manganese mines owned by the Rungta group beyond the permissible limit; and three years before that in 2003, the state pollution control board (SPCB) itself was aware of the illegal mining. In spite of a recommendation of closure by a senior environment engineer of the SPCB, the mine was allowed to continue to operate! The State Govt also ignored the MoEF letter. There are many more such cases.
Around 720,000 tonnes of coal are smuggled out of Jharkhand every year, amounting to a revenue loss of up to Rs. 600 crore. In the state’s Kolhan region, there are more than 135 illegal crusher units. Jharkhand is estimated to get only one-tenth of due revenue from mining, thanks to rampant illegal mining.
Profiteers and Paupers
Indiscriminate mining driven by corporate profit is destroying livelihoods and ecosystems all over the country. The worst-hit are the tribal populations that inhabit some of the most mineral rich regions. This situation has led to many flashpoints of confrontation between tribals and people’s movements on the one hand and mining corporations and governments on the other. Governments justify brute repression against the movements by claiming that the mining projects are crucial for ‘development.’ When the Supreme Court allowed the Vedanta-Sterlite mining MNC the right to mine for bauxite in the Niyamgiri Hills, overlooking the evidence presented by the CEC (Central Empowered Committee constituted by the Supreme Court itself) of widespread violations of environmental regulations, it cited the “abject poverty” of the tribals of Lanjigada as the justification for allowing the mining project, which the Court said would achieve “sustainable development.”
The argument that corporate-led mining will lead to ‘development’ and ‘poverty alleviation’ is a favourite one. The facts, however, do not bear it out. In the three states that vie with each other to roll out the red carpet for Indian and foreign mining corporations – Chhattisgarh, Jharkhand, and Orissa – an overwhelming majority of districts remain backward. 86% of districts in Jharkhand, 90% in Orissa, and 94% in Chhattisgarh are counted among the 150 most backward districts of India.
In Chhattisgarh, 40.5% live below the poverty line. In the coal belt of the state (Korba), only 40% of households have access to safe drinking water. In the coal mining district of Surguja, less than 30% of households have water and power and in Koriya, infant mortality rate is highest among all districts and more than 50% of households lack clean water and power. In Jharkhand, 55% of the people displaced due to mining are tribals – and just 25% have been resettled. Massive occupation of forest land for mining has deprived tribals, who depend on forest produce, of their means of survival. 44% of the state’s people are below the poverty line; more than 6%lack sufficient food. Coal producing districts perform relatively better in HDI since public sector coal mining provides relatively more employment than iron ore mines. In West Singhbhum, rich in iron ore, almost half the population is BPL and 19% of households lack food sufficiency. In bauxite-producing Gumla, half the population is poor, less than 30% has access to safe drinking water. In Karnataka’s Bellary district, child labourers and women mine workers live a life of abject destitution and exploitation. Orissa, which has gone all out in the frenzy to attract corporate investment in mining, is one of most severely food insecure states. Most of the state’s heavily mined districts are tribal dominated. The poverty ratios in mining districts have increased, and 75% of the state’s poorest live in these regions. 62% of people are BPL in Keonjhar, the most mined district of the state. In Koraput, where MNCs reap the bauxite bonanza, 79% are BPL. Tribal and dalit families constitute 44-82% of the total number of BPL families in the most mined districts. Coal-rich districts perform relatively better, again because the public sector has provided better employment. In Jajpur, Keonjhar and Koraput where mining is in private hands, human development indicators are dismal.
Agriculture, which sustains far more people than mining and contributes better to the economy, is badly hit as a result of indiscriminate promotion of mining. In Chhattisgarh the poor in rural and forest regions who depend heavily on agriculture and minor forest produce for livelihood are worst hit. Marginal farmers and landless farm labourers get no compensation from land acquired for mining, and are deprived of livelihood to boot. Only 36% of the state’s total land area is under cultivation or private ownership – the rest of the land is free for predation by mining corporations.
In Karnataka, agriculture has been devastated in the districts of the iron ore mining surge. Mine waste has adversely affected the soil and the yield. In 2003-04, agriculture and allied activities contributed 33% to the Orissa’s GDP, compared to mining whose contribution was only 6.6%.
Not only is the money coming in from mining not being invested in the people; even the returns earned by the state from mining are pitifully small in contrast with the huge profits earned by the mining corporations.
...The mineral wealth of the country, however, is a gift of nature, part of our initial inheritance, which belongs as much to the present as to the succeeding generations. The industries, moreover founded upon such materials, are among the key or mother industries, whose benefit must be available to the whole country and not only a fortunate few who make profit for themselves out of what is common property. Private enterprise ought, therefore, to be barred from prospecting for or exploiting mines and minerals or developing vital industries on which may depend the very life of the country. And even if in any sector, such enterprise is for any reason unavoidable, at least for the time being it must be confined strictly to the natives of the soil.
...The gravest defect of the present-day mineral industry of India is that …..[minerals] are extracted mainly for the purpose of export trade and at a rate which will in course of but a few years deplete the reserves of valuable key-metals…..the price obtained [for the exported minerals] being ridiculously low....This export …has been carried out not by genuine miners, but largely by traders…regardless of the fact that the metals are a rapidly wasting asset of a nation … and that no geological processes … will replenish the exhausted mines....
– from the Report of the National Planning Committee (NPC) set up in the pre-independent India to chalk out the course of India’s economic development
For major minerals produced in India, like coal, iron ore and limestone, royalty is not fixed on an ad valorem basis (percentage of sales price) but is instead a fixed amount per tome of despatch. This is inconsistent with the practise followed in most mineral producing countries in the world. With globalisation, developing countries, under pressure from the international mining conglomerates, compete to reduce royalty rates to attract FDI.
Even the royalties that are fixed (that, for minerals like iron ore are extremely low by international standards) are often evaded. In the iron ore-rich Bellary-Hospet (Karnataka) and Joda-Barbil (Orissa), for instance, the amount of minerals produced is deliberately and severely under-reported, or the ore is reported to be low in iron content. Mine inspectors are bribed to declare mines as inferior grade.
In states that export iron ore the state exchequer receives a very small proportion of the windfall profits that the iron ore fetches in the global market. In 2004, a company that exported iron ore would earn US $55 per tonne (and even as high as $83 per tonne in 2004); of which it would have to remit a paltry Rs 27 to the state.
Moreover, the effective tax rate on the mining industry in India is 44% - lower than that in many other major mineral-producing countries.
Based on 2004-05 figures, royalty on minerals constitute a very small proportion of total revenue receipts in most states. In Goa, a major iron production hub, royalties contribute a mere 1 per cent o the total revenue receipt of the state. In Andhra Pradesh it is 3%; in Orissa 5-6%; in Karnataka 0.7- 0.8 per cent. In Chhattisgarh, it is 10% and in Jharkhand, 13%.
If mining makes such a paltry contribution to the total revenue receipt of most states, what end is the massive scale of devastation of environment and eviction of people from land and livelihood achieving? Neither prosperity nor development for the people: it is only for the profit of greedy mining corporations.
The demand for complete nationalization of the mining sector, a halt to mineral exports and utilization of minerals for local industrialization with job preferences for the local unemployed must therefore be taken up as a key movement task in all mineral-rich states.
All over the country, people are taking up struggles in defence of their land and livelihood, their right to land, forests and water. In all the mineral rich states, we must intensify the movement to demand
• Participation of local people in all decisions of land acquisition and development
• Protection of the rights of adivasis to land and forests
• Complete nationalization of the mining sector
• A halt to mineral exports
• Adoption of ad valorem royalty rates
• Utilization of minerals for local industrialization with job preferences for the local unemployed