Although mines minister BK Handique announced after Friday’s group of ministers’ (GoM) meeting that the contentious proposal for mining companies to share 26% of their annual net profit with the displaced locals was cleared, tribal affairs minister Kantilal Bhuria had in fact surprised others in the GoM by suggesting that the compensation for the displaced be raised to 30%.
Practically, Bhuria’s proposal has the potential to subvert the GoM’s decision as the final decision on the matter has to be taken by the Cabinet. The GoM, headed by finance minister Pranab Mukherjee, is not an empowered one.
The mining industry has been up in arms against the profit-sharing formula, and has pitched for a ‘royalty-linked’ contribution instead. There were also reports about other government agencies, including the Planning Commission and the coal ministry, having reservations about the profit-sharing formula. Planning Commission thought that sharing of net profits with the displaced, if coupled with a cess on royalty, would be a disincentive to investors given that mining is not an activity that ensures a continuous and uninterrupted profit flows. It wanted the proposal’s financial implications for the mining firms to be carefully studied.
The Plan panel, however, underlined the need for having a foolproof system to calculate the profits of mining companies, most of which are not listed, and could under-report their profits.
The GoM, which was supposed to have finished its deliberations on Friday, is understood to have remained indecisive. If the demand gains traction, the plan to offer a 26% share of the profit could be stalled for some more time. A source connected with the development said one of the ministers noted when even 26% was proving difficult to implement, raising the bar would “leave us panting”.
Meeting in the backdrop of growing concerns that granting large area prospecting licences (LAPLs) through the first-in-time (FIT) principle could lead to cornering of mining leases (ML) and trigger irregularities as has happened in case of 2G, the GoM had to address concerns of its key members on the same.
Raising the matter in the meeting, law minister Veerappa Moily sought clarity on the entire issue of granting LAPL concessions through the FIT. Home minister P Chidambaram is also learnt to have raised the same issue.
Seeking to allay their apprehensions, mines minister BK Handique explained that the amended legislation envisages that areas where the quantum of mineralisation was known, the mineral-rich states were free to call for competitive bids, but in areas where mineralisation was unknown, they would be required to operate the FIT principle for non-bulk minerals, which does not include iron ore. ?In case of prospecting licences (Pls), where the extent of mineralisation was known, the mineral-rich states were empowered to resort to competitive bidding. But in case of unknown mineral deposits, especially for non-bulk minerals, they will have to take steps for promotional exploration, creating data and then go for competitive bidding.
Recalling Moily’s suggestion on conserving strategic minerals in the national interest, Handique told the GoM that it has been suitably addressed following the insertion of a new clause in the MMDR Bill that ?in the interest of conservation of minerals of strategic importance, the Centre can issue any direction to the state governments.?
Replying to the concern raised by Planning Commission deputy chairman Montek Singh Ahluwalia that the methodology for calculating the profits being made by the mining community be made foolproof to prevent them from under-reporting their monetary gains, Handique said in the Bill creation of District Mineral Foundation has been suggested to channelise benefits to the people impacted by mining operations has been envisaged.
The mines minister said mineral-rich states have conveyed their concurrence on the proposal to abate all pending applications on mineral concessions saying they have no problems in accepting the proposed system.