Star rating system provides a structured framework which can deliver sustainable development
The scheme of star rating of mines, rolled out recently, is a laudable initiative to encourage leaseholders to adopt sustainable mining practices. However, it leaves some scope for processes and mechanisms that can make it more robust and value-enhancing for the sector.
Under the scheme, mines which follow scientific and efficient processes, address social and environmental impacts, and provide mitigation measures stand to get higher star ratings, assuring them of faster clearances. The scheme has been designed to objectively assess numerous parameters such as progress made on rehabilitation and resettlement plan for the project affected persons, proportion of green energy source, expenditure on CSR, implementation of mining software to name a few.
While mining affects environment and communities in proximity, excessive activity can cause severe repercussions including social. This is underscored by the co-existence of mining areas with areas of rich bio-diversity. Many incidents in the recent past have underscored this risk with the judiciary having to step in to mitigate the situation.
There is, therefore, a clear need for oversight, not only to ensure compliance with existing statutes, but also to promote best practices for sustainable development. Star rating provides a structured framework to that effect.
It is important to understand the need for such a new system when so many are already in place under their respective statutes. To wit: the ministry of mines, through the Indian Bureau of Mines, oversees compliance with approved mining plan; the director general of mines safety ensures compliance with safety-related requirements; the ministry of environment & forest (MoEF) ensures all forest and environmental compliances are met; the Land Acquisition and Rehabilitation and Resettlement Act 2013 makes it mandatory for the leaseholders to take care of the rehabilitation and resettlement process; and then we have the state mining departments for ensuring compliance related to royalty payments, District Mineral Foundation, and National Mineral Exploration Trust, etc.
Which begs the question, what’s the need for a separate rating system for mines based on only a few parameters—that, too, under different applicable laws and ministries? Couldn’t rating be done based on the information already provided to ministries?
At this juncture, the answer can only be interpreted through expressed intention. The ministry of mines plans to bucket all relevant criteria under different ministries, which makes eminent sense and even justifies bringing in an entirely new and integrated system across a range of sustainable development parameters. Also, going by the minutes of the last meeting of the ministry’s empowered committee, the government intends to encourage all leaseholders to move towards higher ratings.
At a broad level, the scheme has the potential to make the sector more sustainable and excellence-driven, heralding a new era, though its effectiveness can be judged only when it goes into the implementation phase.
At this stage, there are two areas where the scheme can be fine-tuned.
First, there is no provision that a company has to necessarily move up the rating ladder and in the absence of that, there is a definite need for clearly articulated incentives for the mining company to ensure meaningful participation. The scheme assures companies with high star ratings of faster clearances. However, each project has its unique set of requirements and clearances are granted on a case-to-case basis.
Besides, all such clearances typically have set processes and cannot be granted until these have been completed. Therefore, it would be useful to elaborate this benefit in the scheme document and also make it applicable for approvals under the jurisdiction of the state governments.
Furthermore, star ratings could potentially be recognised by the lenders and investors so that the socially, environmentally and operationally responsible ones find it relatively easier to finance their investment needs. As such, leaseholders can use the rating to enhance their credibility among stakeholders and exhibit their commitment to sustainable development.
Secondly, while the scheme provides for confirmation of star rating upon due verification by the Indian Bureau of Mines, it does not provide for a detailed process for verification of information furnished by the leaseholder.
It would be interesting to see how bureau goes about implementing the system of verification. Considering the enormity of task to be carried out annually, the bureau may require reputed independent service providers or non-government organisations to assist it in the process.
It is anticipated that, eventually, star ratings may be integrated with other important initiatives of the ministry of mines such as the Mine Tenement System for the purpose of regulating all mining concessions and Mine Surveillance System to check incidences of illegal mining. Accordingly, the process of verification is likely to evolve with development and operationalisation of these systems.
Sustainable mining is a sine qua non for development, and given the measures that have been discussed, star rating of mines can go a long way in promoting that.
The author is director—energy & natural resources, CRISIL infrastructure advisory. The article is a part of the ‘CRISIL Infrastructure Intelligence’ initiative.