As the Supreme Court-appointed CEC's mandate to Karnataka's mines illustrates, R&R has become the pivot on which mining activity now hinges. Three laws (or soon-to-be laws) hope to change the face of mining, but developed countries with no exception have adopted laws friendly to affected families and left any pricing movements to market mechanisms. While the ongoing conflict between human settlements and mining may never really be over, the new laws in India that govern R&R have promptly been branded socialistic or sustainable, depending on which side you are on. What do the laws mandate, and how will they impact the mining industry and mineral prices? Janaki Krishnamoorthi examines, and a host of top practitioners and policymakers explain, project and analyse.
The conflict between mining and conserving the environment and livelihood of project-affected persons (PAPs) continues. Trying to find a balance between the two has been a big challenge for the Indian government, more so now in the wake of several mining scams, violations of environmental norms, dissatisfaction and unrest among locals in the mining belts.
The Shah Commission set up in November 2010 to inquire and determine the impact of illegal mining in the country had highlighted a number of irregularities and violations under the Environment (Protection) Act and the Forest Conservation Act. It has so far submitted reports on Goa, Odisha, and Jharkhand. The Lokayukta Report of 2008 had also uncovered major violations in Karnataka and severe ecological changes. Much of these damages have reportedly been caused due to ineffective rehabilitation and resettlement (R&R) policy and/or its poor implementation.
The Supreme Court banned mining in Karnataka in 2011 and in Goa in 2012. However, mining was allowed to be restarted in Karnataka a regulated manner in mid-2013: After analysing the vast damage caused by decade-long extensive illegal mining, the Supreme Court-appointed Central Empowered Committee (CEC) and Indian Council of Forest Research Education (ICFRE) have recommended mandatory implementation of R&R measures. However, although mining was allowed to be restarted in a regulated manner in mid-2013, full-fledged production in the state is yet to resume despite the fact that more than 70 of the more-than-100 cases have been completed.
The new Land Acquisition Act which came into effect this year and the proposed Mines & Minerals (Regulation and Development) Bill, 2011 (MMRD) are expected to give a boost to the effective implementation of R&R and foster systematic and sustainable growth of the mining industry.
The new Land Acquisition Act will bring in stricter norms for resettlement and rehabilitation. The Act which demands that a social impact assessment study be conducted for acquisitions leading to large-scale displacement, has also increased the landowners' compensation significantly. The state governments will also have to set up at least six bodies, including a Land Acquisition Rehabilitation and Resettlement Authority, a State Social Impact Assessment Unit, an Office of the Commissioner Rehabilitation and Resettlement and a State Level Monitoring Committee.
The pending MMRD Bill on the other hand proposes a profit-sharing system under which coal companies will provide 26 per cent of post-tax profit for the welfare of affected people and non-coal mining companies will share an amount equal to that of royalty with local residents instead of just sharing profits. The Bill also provides for setting up of National Mining Regulatory Authority and Tribunal.
Industry analysts however do not believe that the bills alone will have the necessary impact as there are several issues still unclear, including methods of enforcement.
Niladri Bhattacharjee, Director, KPMG Advisory Services India, explains: "The MMRD Bill, when passed along with the new Land Acquisition Act and the Companies Act, will definitely help raise the bar. However, there are several issues that still need to be looked into. For example, the government has come out with one single mineral policy, but nobody has given a thought to the fact that each category or family of minerals may require different set of regulations. Rehabilitation of PAPs, too, needs to be addressed from various perspectives-whether it relates to compensation, providing jobs or building a rehabilitation colony [since the PAP requirements may vary]. In western India, people opt for compensation whereas in the eastern parts, they prefer jobs which are in short supply. To find employment for such a large number of people in one state will be difficult. So they may have to look for alternative sources."
Bhavesh Chauhan, Senior Analyst (Metals & Mining), Angel Broking, seconds the thought that the job is half-done: "There is not enough clarity on how to proceed on land acquisition. The Mining Bill is unlikely to see the light of day this year. So, it is difficult to quantify any cost implications of R&R activities on mining." The compensation and other norms included in the Land Acquisition Act and the MMRD Bill's proposal on sharing of profits/royalty with PAPs has not gone down well with mining companies, some of whom believe this will make organised and scientific mining unviable which will lead to understatement of profits or evasion.
"These two bills will make mining unviable for various reasons," says Jayapal Reddy, General Manager - Resource Planning in-charge, NMDC Limited. "Firstly, the compensation to landowners has been raised to 2-4 times the market value depending on the location. Providing employment to all the members of the family above the age of 18, profit sharing with PAPs, conducting a social impact assessment - all this will ultimately raise the cost to the mining companies. Hence, the compensation and profit sharing percentages should be made reasonable." All mining projects of NMDC are today located in forest areas and they have a good reclamation plan in place, says Reddy. "We are paying compensatory afforestation charges, undertaking afforestation and plantation in and around mining areas and disposing off the waste excavated appropriately."
Enforcement of various regulations will no doubt be a big challenge-whether it is rehabilitation and resettlement, or about scientific closure of mines and restoration of the land to an acceptable state.
"To ensure that all the regulatory framework and implementation mechanism are in place and effectively implemented has been a big challenge for us. Over the last two years, we have streamlined all the procedures and approvals on line to prevent any clandestine or illicit activity," says Deepak Kumar Mohanty, Director of Mines, Department of Steel & Mines, Government of Odisha. The Shah Commission report had pointed out several violations under the Environment (Protection) Act and the Forest Conservation Act in mining in Odisha too. Mohanty, though, denies that his department had received any specific directives in respect of the action to be taken. "I have neither seen the report nor has it been tabled in the Parliament. Once that is done, we will definitely take action as required," he adds. Another major obstacle in the implementation is the lack of mechanisms to implement some of the proposals. Evidently, there is a dire need for a efficient and transparent mechanism that would ensure that the new bills are effectively implemented and not remain in theory. KPMG's Bhattacharjee is sceptical about the monitoring process in R&R: "How will the government ensure that profit or royalty from mining companies reach the PAPs? Who will hold it in trusteeship?
There is a need for a cooperative system or some kind of organisation that will ensure that the moneys reach the people or otherwise used for their development. Otherwise, 50 per cent of the mining companies' contribution to state governments will evaporate due to their inefficiency, and the balance due to corruption. Ultimately, the PAP will get nothing."
Balancing ball game
No doubt, mining is a balancing act, ensuring mineral development and protecting the environment and safeguarding the interest of the PAPs. The solution adopted successfully worldwide has been to create a framework that will mininise the damage to environment and help in sharing the benefits of the resources with poor communities living in these rich lands. In this regard, the Working Group on Mineral Exploration & Development (Other than Coal & Lignite) for the 12th Five Year Plan (2002-2017) had provided several recommendations like categorisation of mineral resources into high and low risk areas for the purpose of investment in exploration based on environmental and social sensitivities; classification of No-Go Zone areas that are statutorily prohibited or protected zones under various central/state regulations and international conventions and disallow mining in these areas; sharing of benefits by mining companies with PAPs; setting up of institutional structures and mechanisms at central, state and district levels to address issues concerning consultation and stakeholder engagement, benefit sharing, environmental impact and conservation of natural resources; developing a sectoral regulator to address social and environmental concerns through statutory interventions and approvals. The committee had also suggested steps for rehabilitation of abandoned mines.
Mine closure, the process of shutting down mining operations on a temporary or permanent basis and how the site will be returned to an acceptable state for a pre-arranged land use, is also a component of the R&R process as abandoned mines or improperly closed mines without being adequately decommissioned or reclaimed can be safety or environmental hazards. Experts believe mine closure needs much reform.
Undoubtedly, R&R practices will be the game changer for the mining industry this decade. The greatest challenge for the government and the mining companies will be to perform the balancing act with commitment.
CIL's job-friendly R&R policy
B Narsing Rao, CMD, Coal India Ltd, the largest coal producer in the world.
Coal India Ltd (CIL) has a well defined R&R policy that is in line with the national policy and more friendly towards PAPs than before.
Earlier, people were hesitant to agree to give up their land as small land holding patterns did not meet the requirements for getting a job. The new policy is more relaxed. Firstly, CIL has liberalised the employment policy for the PAPs. Earlier, employment was provided to the owner of at least two acres of land. As per the new package, 50 jobs will be provided if 100 acres of land is acquired. This obviously implies providing quite a few employments to those having less than two acres. People having land less than two acres can club their holdings and decide upon one employment for every two acres of non-homestead land acquired. For persons whose homestead has been acquired an alternative site measuring 150 sqm or equivalent amount in cash per family is offered along allowance for transit.
Secondly, the cash compensation, in addition to the price of the land has been doubled for those who lack employability or do not have any linear dependent. For those who are not interested to take up jobs, the cash compensation is Rs 2 lakh for first one acre of land lost, Rs 1.5 lakh for the second and third acres, and Rs 1 lakh from fourth acre of land onwards. In states with a defined R&R policy whose compensation package is more than that offered by CIL, then Coal India pays the better package. The policy also offers a lot of other benefits to PAPs and is designed to ensure people willingly give their land for our mining activities.
Integrate R&R with CSR to build Corporate Villages
TK Lahiri, CMD, Bharat Coking Coal Ltd, which has pioneered ecological restoration of land degraded due to mining.
Inclusiveness is the biggest challenge for R&R in our country. With the new land acquisition law, the mining bill and the CSR bill-all of which must be viewed in totality-in place, such integration will ensure smooth operations, double-digit growth, and negligible impact on cost negligible.
CSR and R&R should have a five-year plan. Need-based survey to generate appropriate data and R&R based on actual available data should be adopted. Advance action should be taken at locations where new projects are expected in next five years. This will be more acceptable, effective and inclusive to the society to be displaced, and the project will be sustainable.
In the new concept of Corporate Village-creating a semi-town between the project area and the nearby established township by land acquisition-PAPs should be resettled and rehabilitated in areas with facilities for skill development needed for livelihood. In the long run, skilled PAPs can be absorbed in the Village.
In the larger picture, the concept of Corporate Village will also reduce the load on urban population, and gap in facilities and expenditure. Additionally, the Department of Public Enterprises (DPE) must change its view of CSR activity and make activities need-based and comprehensive. Corporates should be a part of the development work and the Corporate Village model demonstrates this form of inclusiveness in the growth agenda.
Don't block mining
Arup Roy Choudhury, CMD, NTPC, the biggest consumer of coal in India.
The country needs coal and power and we cannot possibly defer all fresh projects. As far as land for new mines or large power projects is concerned, the government already knows the use pattern and nature of land on which the project is proposed to be built. Forest or tribal lands are already earmarked and the government might not give a mandate for a project on such land. However, natural resources like coal cannot be shifted out if these are in forest or tribal lands. Therefore, the need there is to formulate programmes for afforestation in adjoining alternative sites when mining is to be started. Alternative use of tribal and forest lands could also be formulated.
Caution on employment in R&R
Dinesh Chandra Garg, CMD, Western Coalfields Ltd
For land acquisition, Western Coalfields follows the Coal Bearing Area (A&D) Act, 1957 and R&R benefits are provided as per provisions of R&R Policy of Coal India Limited. As per R&R Policy 2012, employment is provided to land losers for every two acres of land acquired.
The land losers who are not offered employment, or forego employment, are paid monetary compensation @Rs 5 lakh per acre.
The land losers may also take the amount of monetary compensation in lieu of employment in the form of annuity and for persons whose homestead is acquired, one-time lump-sum payment of Rs 3 lakh is paid in lieu of alternate house site, assistance in designing shifting allowance, compensation for construction of cattle shed, monetary compensation for construction of work shed etc, and subsistence allowance for each affected displaced family at the rate of 25 days (minimum agricultural wage) per month for one year is provided in addition to house compensation.
Coal CPSEs are already paying and providing facilities favourably comparable to what is mandated in Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, to the Project affected People.
In WCL, already the enhanced land rates notified by Government of Maharashtra for land acquired by the company are applicable for acquisitions done under CBA (A&D) Act, 1957.
In the new bill, rates of land compensation have been raised almost four times of the existing rates. R&R entitlements included in the new Act include provision for constructed house as per Indira Awas Yojana specifications, subsistence grant of Rs 3,000 per month for one year, one-time transportation cost Rs 50,000, cost for cattle shed/petty shops Rs 25,000, one-time grant to artisan/small traders Rs 25,000, one-time resettlement allowance Rs 50,000 and employment to at least one member per project-affected family.
The challenge, though, is that losers generally insist on employment. In the long run it may not be feasible to provide employment to such large numbers of land losers due to lack of vacancies.
Therefore, skill development of land losers for their self employment will be preferred as part of rehabilitation in addition to extending the benefits of annuity.
R&R done, mines not started!
RK Sharma, Director-General, Federation of Indian Mineral Industries (FIMI)
In Karnataka, in spite of a Supreme Court, through the Central Empowered Committee (CEC), has instructed the state to complete R&R activities and start mining activities, the government seems reluctant to do so. The steel industry is languishing in the state but even though this is all within the government's power, it does not seem to want mining to re-commence.
We have ourselves completed 99 R&R activities-a record-and sent it up to the Indian Council of Forestry Research and Education (ICFRE), which has approved as many as 74 of these and put them up to the CEC for approval. The R&R was a smooth process. CEC's approval has been obtained for these. But only 16 of the approved mines are working.
For the mining sector, there is an increased emphasis on R&R. By denying a mining project to a zone that is declaring it sensitive, we're depriving locals of employment. Even at the cost of higher cost of R&R, projects must take off. We cannot allow international NGOs to dominate interests.
States are sitting on 65,000 mining applications-and largely, corruption is the culprit. Iron mines are shut down, and even where ore is available, export duties and higher freight charges make things stagnant. The industry output is down and demand is reduced. Additionally, no decisions are being made. I do not believe things will get a move on as long as this government is in power. Decision-making by the new government [due later this year] will determine how the mining industry takes shape.
Shah Commission report in Parliament
The Shah Commission's report on illegal mining in Odisha and the action-taken report (ATR) are to be tabled in Parliament, according to a decision taken by the Cabinet. The report recommends that a sum of Rs 60,000 crore should be recovered from miners in Odisha for violating various norms.
Don't rehabilitate: Lease
NN Gautam, former bureaucrat in the coal ministry and Advisor to the Board of Directors at ACB India, the largest coal beneficiation operator in the private sector.
To an affected person in a mining site, lumpsum compensation may look lucrative on the face of it. But there is a gradual realisation that perennial income of some sort works better.
However, employment cannot be that source. In the experience of the private sector, this has created an environment where those employees shirk work. This is an on-ground, practical problem: Such employees have formed groups and often don't understand what the scope of their work is.
The right method would be the lease method: to return the land to the landowner upon closure of the mine, and pay the landowner annuity for the years that the mine uses the land. This would be both a fair and equitable mechanism. The experience in this has been good. We tried this as an alternative in Eastern Coalfields-when the land-loser was ill and unfit for employment. The amount of the lease must be lucrative and can be worked out by negotiation.
This becomes even more important when you consider conditions that need specialised mining-for example, underground mining.
This would limit rehabilitation. The problem with rehabilitation is that a whole village needs to be built greenfield. There are other problems including land records.
Automation to step up coal production
PK Chandra, COO and Whole Time Director, McNally Bharat Engineering Company Ltd, an EPC major in mineral beneficiation, coal washing and plant construction.
We are not seeing good projects coming in because most projects are stalled. Some coal mining projects from Coal India and its various subsidiaries in automation of wagon loading systems, coal handling at sites, etc. We are executing a project for Mahanadi Coalfields Ltd, and we have secured a project from South Eastern Coalfields. There are a few more expected this year in coal because Coal India has been asked to step up production, and this will entail automation of processes, including loading systems at mining and loading sites-with a push to power plants, the main users of coal.
I do not expect too much for construction and equipment industries this year, because mining projects are not going through. On the non-ferrous side, too, there is not much movement. This has little to do with the Karnataka and Goa mining activity. Not much investment is expected in Karnataka and Goa. Although the prospects will be higher, the market is dampened, and the demand has fallen in the user markets.
The cost factor
Rajesh Nath, MD, VDMA India Services, a bridge-builder between mining and other industries in Germany and India.
The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill, 2013 might speed up land acquisition for companies by reducing the number of hurdles and disputes in the process, but is likely to sharply inflate business costs for companies from the mining, metal and infrastructure sectors as compensation would raise costs of projects fivefold.
The law mandates that compensation and rehabilitation payments to land owners and livelihood losers be upfront. This misaligns the interests of land acquirer and those affected. Once the payment is made, one or more of the affected families may seek to delay the progress of the project to extract additional compensation, thereby adversely affecting those who chose long term employment in the affected families.
The Bill should link compensation and entitlements to the progress and success of the project, such as through partial compensation in form of land bonds. These success-linked infrastructure bonds may also help poor states reduce the upfront cost of land acquisition. Kerala has decided to pursue the use of infrastructure bonds as a form of payment to land owners.
Cascading effect on mfg
Malay Chatterjee, CMD, Kudremukh Iron Ore Company Ltd (KIOCL), a major mining PSU in the western ghats of Karnataka.
We are a central PSU with a core competence in mining, but were out of business since January 2006 because mining activities have come to a standstill. We have a 3.5 million tonne pellet plant and in order to sustain this plant, we have been accessing iron ore fines under LTA from the Chhattisgarh mines of NMDC. That entitles a huge logistics cost as the iron ore fines travels through a 750 km by rail, and subsequently 1,500 km to New Mangalore port. So we're not making much profit in making pellets, even though our pellets are world-standard, popular, and have justified specifications. The Indian Railways imposed a "distant way charge" in 2009. But we were fortunate enough because of the strengthening of US dollar and weakening of Indian rupee-now we have been able to move iron ore for export.
With the suspension of mining activity in Karnataka, miners are forced to implement R&R. Only A and B mines (read interview with Tushar Girinath in this section for details) resumed mining activity after implementation of R&R. C category mines have not seen any activity since their policy is under contradiction and will go under some process of being allotted to some CPSU or maybe through the auction route.
The intervention from CEC and the central government is a welcome sign for the mining industry and enforcing R&R be implemented to the true late-rent period. However, implementation of R&R is really slow even after CEC's directives.
CIL, SA in breakthrough agreement
Coal India (CIL) and South Africa's Department of Trade and Industry (DTI) have joined hands to explore mutual prospects in the coal sector in order to increase bilateral trade ties. The agreement was reached during a meeting between the two organisations on the sidelines of the Africa Mining Indaba in Cape Town. Both the parties had also discussion on the cost involved in the mining business and the industry's policy, as well as government priority in terms of mining and regulatory frameworks in the effort to clarify and provide predictable solutions.
R&R = JOBS + TRAINING
RK Sachdev, President, Coal Preparation Society of India, and former advisor to the coal ministry
Since the 1970s, the government has been toying with the idea of a national rehabilitation policy, but by the 1980s, many mining states had already developed state policies.
In R&R, the compensation should be in the form of jobs, but the job creation must be on a rational basis. R&R cannot be on market economy, but on humanitarian and socio-economic grounds. Training is a big part of this solution. After checking the family background, the company can then decide to train land-losers and persons affected in various departments, including even sales and marketing. Simultaneous application of community development through CSR will also be easier, since a good R&R application automatically dovetails into neighbouring areas.
Although costs may escalate by up to 10 per cent from this process, I am unconvinced that greater emphasis on R&R will place greater burden. R&R costs will be even less worrisome than the incremental costs of time overruns-mostly because projects do not start on time. This often happens because landowners are unwilling to part with their land due to inadequate compensation. Therefore it is important to commit to even a higher cost rather than delay the project and incur costs due to the time overruns. And such delays in land acquisition are often because of the involvement of NGOs. Direct dealing will often cut down the time required.
e-auction of stacked iron ore in Goa
Some mine owners in Goa have demanded that before the e-auctioning of stacked iron ore by the government, legality of the process should be established. The state government will e-auction around 15 million metric tonne of ore stacked at jetties and also in the mining lease areas.
A Supreme Court-appointed committee headed by UV Singh would monitor online auctioning which is likely to happen by mid-February. The Goa government had said the excavated mineral ores should be allowed to be transported as early as possible.