India digs deep to outflank Maoists
By Sudha Ramachandran
BANGALORE - The Indian government is considering legislation on mining that
could have far-reaching implications for the industry as well as the ongoing
Maoist conflict. Besides seeking to remove loopholes in existing laws that
facilitate illegal mining, the legislation aims at making local communities
stakeholders in the mining process.
The proposed legislation, the Mines and Minerals (Development and Regulation)
Act [MMDRA], 2010, makes it mandatory for mining companies "to allot free
shares equal to 26% of a project's equity to the local population affected by
the mining project". Under the legislation, licenses can be given to only those
companies that provide full disclosure of their mine closure plans
and corporate social responsibility (CSR) activities.
Still under discussion, the draft is being vigorously opposed by industry.
In a letter to Prime Minister Manmohan Singh, the Federation of Indian Chambers
of Commerce and Industry's (FICCI) secretary general Amit Mitra claimed that
the proposed scheme of giving 26% equity to locals was difficult to implement.
He also warned of the danger of vested interests buying these shares and
gaining control of a company. "It is mandatory for a listed company to have a
25% float in the market. If 26% - out of the balance of 75% - is allotted as
compensation, the promoter will become vulnerable to hostile takeovers," Mitra
The letter also warned that the legislation would "deter the flow of
investments" into the sector as "no shareholders would like to invest where 26%
of the shareholders do not make any contribution to the company".
One of the main aims of MMDRA is to address the problem that millions of
tribals living in mineral-rich lands confront - that of loss of land to mining
activity. Prior to economic liberalization, mineral extraction and refining was
largely undertaken by government-run companies. That changed in 1993 with
foreign direct investment (FDI) being allowed in the sector and the process for
investment was further eased in 1997. Since 2006, 100% FDI has been allowed in
mining. This has prompted a rush of deals, most of them violating laws and
Much of India's mineral-rich land is inhabited by tribals. Under the
constitution, an array of legislation and court judgments, the sale of tribal
land is forbidden. Yet thousands of hectares of forests and mineral-rich land
where tribals live have been taken over by the government for hydroelectric
projects, industry, mineral extraction, etc. Since 1991, diversion of forest
land for development and industrial use has grown from 789 hectares at the end
of 1993-94 to 28,769 hectares a decade later, an average annual increase of
43%. A third of this diversion was reportedly for mining activity.
Diversion of such land has had a devastating impact on tribals. Millions have
been displaced. Although tribals constitute roughly 8% of India's population,
they account for 40% of the 50-60 million displaced since independence in 1947.
To tribals, displacement has meant loss of habitation, livelihood and way of
life. Mining activity has not only deprived them of their land but degraded
their environment. Rehabilitation has been abysmal. "Fewer than 20% have been
rehabilitated, even partially," Walter Fernandes, director of the North Eastern
Social Research Center at Guwahati in the northeastern state of Assam, has
The impact of displacement has prompted millions of tribals to protest land
acquisition and poor rehabilitation. Several tribal mass organizations across
mineral-rich tribal states like Chhattisgarh, Orissa and Jharkhand are
protesting acquisition of their land by mining companies. These protests have
put on hold scores of projects. These include Korean steelmaker Pohang Iron and
Steel Company's US$32 billion project; British mining giant Vedanta Resources'
project in Orissa; ArcelorMittal's $9 billion steel projects in Jharkhand and
Orissa, and Jindal Steel Works' $7 billion steel plant in West Bengal.
Maoist activity in seven eastern and central states is threatening at least $78
billion in natural-resource projects, brokerage CLSA Asia-Pacific Markets
estimates, according to Bloomberg.
"The growing Maoist insurgency over large swathes of the mineral-rich
countryside could stall industrial-investment plans just when India needs to
ramp up its industrial machine, just when foreign companies are joining the
party," the FICCI has reported.
The impact of displacement on tribals lies at the heart of their alienation
from the Indian state, providing the Maoists with a cause to espouse and a
flood of angry youth willing to take up arms. It is not a coincidence that it
is mineral-rich tribal lands in central and eastern India that are the
epicenter of the Maoist conflict. Maoist violence killed 426 people in the
period from January to July, up nearly three times from a year ago. Maoists
have some degree of influence in 220 of India's 626 districts, the government
It is to wean away tribals from the Maoists and enable new mining activity to
take off in these states that the government is putting in place provisions in
the legislation that will give tribals a stake in allowing mining activity on
their land. India must attract $7 billion in funds by 2013 to develop an
additional 100 million tonnes of coal and 50 million tonnes of iron ore to meet
estimated demand and maintain economic growth of more than 6% over the next two
years, according to the Economic Times.
Activists have welcomed the proposed legislation. Ravi Rebbapragada,
chairperson of mines, minerals & PEOPLE (MMP), an alliance of individuals,
institutions and communities who are concerned and affected by mining,
describes it as a "good beginning". He drew attention to the landmark Supreme
Court judgment of 1997 (often called the Samata judgment, after the
non-governmental organization Samata that filed the case on behalf of tribals).
This nullified all mining leases granted by the Andhra Pradesh government in
tribal areas and ordered a halt to all mining operations there. Rebbapragada,
who is Samata's executive director, said the judgment had called for 20% of all
net profits of mining companies to be set apart as a permanent fund for the
establishment and provision of basic facilities in the areas of health,
education, roads and other public amenities. The proposed mining legislation
"goes beyond that historic judgment", Rebbapragada told Asia Times Online.
The other important issue that the legislation proposes to tackle is illegal
mining. A parliamentary committee on illegal mining identified 14,504 illegal
mines in 2005. This figure has skyrocketed since then. Figures released
recently by the Ministry of Mines estimates the number of illegal mines
nation-wide for major minerals at 2,496 and for minor minerals at 28,055.
The proposed legislation provides for illegal mining cases to be investigated
by the National Investigation Agency, which was set up after the 2008 terrorist
attacks in Mumbai to look into offences that affect national security. It will
allow the government to cancel leases of companies engaged in illegal mining or
paying the Maoists "levies" for trouble-free extraction of minerals.
According to Vishwa Ranjan, the director general of police of Chhattisgarh, the
state worst hit by Maoist violence, the Maoists extort 20,000 million rupees
(about US$433 million) across India from iron and coal mining companies,
infrastructure project contractors and tendu leaf (used in rolling beedis
or country cigarettes) businessmen. Mining companies - government, privately
run and illegal - are their main source of finance with illegal mining being
particularly lucrative. Mining companies are forced to cough up huge sums as
In the coal-rich state of Jharkhand, Maoists are said to control almost the
entire illegal mining of coal. They constitute the mining mafia there, where
about 700,000 tons of coal is illegally mined annually.
The Maoists claim to be waging their armed struggle on behalf of the tribals,
to stop their exploitation by mining companies, among others. The proposed
legislation could go a considerable way in reducing that exploitation. But it
will bring under the scanner their own business deals, which are funding their
war. The legislation, if passed and implemented, could result in their fortunes
Rebbapragada observes that even if the legislation comes into effect and
illegal mining comes under the scanner, the Maoists will find a way to keep
their funding from the mining industry flowing.
So will the legislation as proposed be enacted? The powerful mining lobby is
firmly opposed to paying 26% in equity. The FICCI wants a one-time fixed
compensation for tribals whose lands are acquired. Lakshmi Mittal, chairman of
ArcelorMittal, prefers a "fair settlement", while others are calling for an
According to reports, the government is likely to allow mining companies some
"flexibility". Under this new proposal, annuity payouts to those losing land
will be fixed before the start of operations and companies will be asked to
provide this benefit either as a cash payout or in equity as shares or a mix of
both. Such a watered-down proposal could be placed before parliament, possibly
within the next few months.
The nexus between the mining lobby and politicians is well known. In Karnataka,
which accounts for the country's fourth-largest iron-ore deposits, all the main
political parties in the state have in varying degrees been funded by mining
profits. The ruling Bharatiya Janata Party took this nexus further. It brought
the mining barons into active politics and further, has awarded at least three
of them with ministerial positions. These baron-politicians have repeatedly
indicated that they are able to not just dictate terms to the Karnataka
government, but make or break it as they so wish.
A similar situation, perhaps to a lesser degree, exists in the mining-rich
states. So pitted against the tribals - India's poorest and most exploited
section - is a powerful band of miners, ministers and Maoists. It does seem
unlikely that the tribals will come out smiling from this contest.
Sudha Ramachandran is an independent journalist/researcher based in