Does the KR Rao Committee ring a bell?

It was set up last month by the Union Ministry of Mines after the Supreme Court’s tough judgement on illegal iron ore mining in Odisha. Disposing of a petition filed by the non-profit Common Cause, Justice Madan B Lokur and Justice Deepak Gupta not only ordered the Union government to recover the full value of iron ore mined illegally by the mining lease owners, it also asked it to review India’s mining regulations.

These regulations have failed to arrest illegal mining in the country as is evident in several cases across India – for instance in Karnataka and Odisha, as well as Goa, where the Supreme Court imposed a ban on iron ore mining in 2012, and Tamil Nadu, which has seen rampant illegal sand mining for several years. They have also failed to mitigate the social and environmental consequences of mining. Indeed, there are glaring economic inequalities in India’s mineral-rich districts. Communities living close to the mineral reserves teeter at the edge of destitution and battle environmental pollution even as a handful of politically-connected people amass extraordinary riches.

The Supreme Court therefore directed the Centre to set up an expert committee, chaired by a retired judge, to identify the regulatory lapses that allowed illegal mining. It also directed the Union government to review the National Mineral Policy, 2008, in order to bring in greater transparency, environmental protection and more social and economic growth.

Accordingly, the Ministry of Mines set up the KR Rao Committee on August 14. The committee is expected to submit its report on October 31. Its composition, however, raises questions on whether India’s mining sector will see a fundamental overhaul or more of the same.

The committee underwhelms

As the ministry’s order announcing its creation shows, the committee has 29 members. No less than 25 of them are bureaucrats. Eight are joint secretaries in the Union government. Twelve are state mining secretaries. Niti Aayog, Geological Survey of India, Railway Board and the Indian Bureau of Mines get one member each. The chairman, K Rajeswara Rao, is an additional secretary in the Ministry of Mines.

That leaves four places, which have been given to representatives of the Confederation of Indian Industry, the Federation of Indian Chambers of Commerce and Industry, the Federation of Indian Mining Industries and Assocham.

For a body set up in response to a Supreme Court judgement flagging endemic corruption, environmental damage and unequal distribution of gains from mining, the KR Rao Committee’s composition is remarkable. It has joint secretaries from the ministries for coal, finance, shipping, road transport, mining and environment but no one from tribal affairs. It has no ecologists. Nor does it have anyone from civil society.

“This has been the pattern we see in most committees set up by the central government,” said Biswajit Mohanty, a Bhubaneswar-based environmentalist. “There are no voices of the people affected by these projects.”

In the absence of rival viewpoints, he asked, “How can such a committtee suggest dramatic changes to how India manages her mineral resources.”

Too important to write off

And yet, a dramatic reconfiguration of mining is what India needs right now.

Its mining sector is a mess. Most of the gains from mining go to a handful of people. The rest of the state – its people or the exchequer – get close to nothing.

This is what happened during Tamil Nadu’s sand mining boom over the past three decades. Even highly conservative estimates peg the value of sand mined from the state’s rivers at Rs 20,000 crore a year. What came to the state was a fraction. Rs 214 crore in 2014-’15, and Rs 133 crore in 2013-’14.

Or take Goa. During its iron ore boom between 2004-’05 and 2011-’12, the state exported ore worth Rs 53,833 crore but earned only Rs 2,387 crore as royalty or less than 5% of the value. The same pattern is seen in iron ore mining in Odisha and stone crushing in Punjab.

In economic terms, these discrepancies would be described as revenue foregone by the state. This is money that could have used more productively elsewhere.

That said, the costs of unequal distribution of gains from mining go beyond lost revenues for the state government. These super-normal profits contribute to a weakening of the rule of law. Miners buy government approvals and acquire the financial and political muscle to silence the opposition. As checks and balances weaken, the state gets hurt in other ways. As seen in Tamil Nadu, the flow of money from mining skews competitive advantage amongst political parties.

The country also sees excess mining – with predictable implications for future generations.

For instance, in Odisha, at the height of the boom, the Environment Ministry granted environmental clearances to 90 iron ore mining leases in the state, which produced 154.263 million tonnes annually, according to the 2013 Shah Commission report on illegal mining in the state.

Odisha’s reserves are 4,704 million tonnes. At an annual production of 154.263 million tonnes, Odisha would finish off its iron ore in 30 years with little gains for most people in the state.

How to fix mining

Over the last five years, India has taken some steps towards cleaning up its mining sector.

Discretionary allocations – of the kind seen in the captive coal block allocations during the previous Congress-led United Progressive Alliance regime, which led to allegations of corruption – have been stopped. The country now auctions its natural resources. But it needs to work harder at removing infirmities. (See this two-part series on India’s coal block auctions for more). At the same time, as Rahul Basu, an activist with Goa Foundation says, the government needs to squeeze super-normal profits out of mining.

How should this be done?

As reported in 2015:

 “The Shah Commission recommended the creation of a Mineral Resource Rent Tax that would accrue to the state for investment in infrastructure and creating jobs for the communities impacted by mining. According to its report, 50% of the value of the ore should flow to the state, of which half should be used for ‘the welfare of the area from where the minerals are extracted’.”  

A more aggressively egalitarian idea comes from Goa Foundation. It wants mining to be managed in a manner that ensures most of the gains flow to the state government – the ideal is 100% recovery. One way to do this is where governments auction out mining but retain control over the marketing of the ore. As Basu told in 2016, “There’s so much profit from mining that it seems to justify any human rights violation. So we are trying to suck the easy profit out of the system.”

However, he does not think that the money should be treated as revenue by the state government either.

Instead, the Goa Foundation proposes that all this money should go into a permanent fund from where a Universal Basic Income is distributed directly to the people. He said this is similar to Norway’s Sovereign Wealth Fund, which has built up a corpus of over $800 billion from North Sea oil revenues for its population of five million.

In the coming days, activists and others will send in their representations to the KR Rao Committee. Now to see what its report recommends.