India’s mining sector is notorious as the source of some of the country’s biggest corruption scandals. Illegal mining activity and blatant violation of existing legislations is rampant in the mineral-rich areas of several states. Moreover, mining companies wishing to acquire land for new projects are facing strong opposition from local communities. It is in this context that the UPA government’s Union Cabinet has approved the new Mines and Minerals (Development and Regulation) Bill (MMDR Bill) 2011. This bill, which intends to replace the existing MMDR Act 1957, is an attempt to institutionalise the vision of the National Mineral Policy (NMP) 2008.

The MMDR 2011’s ‘profit-sharing’ clause has drawn outraged protest from the mining sector. The bill proposes that in addition to the existing structure of taxation and royalties, coal miners will have to part with 26 per cent of their profits, and in the case of other mining activities, companies will have to pay an amount equivalent to the royalties they currently pay to the state government. All this will get deposited to the newly formed district-level ‘Mineral Foundations’. Therefore, the MMDR envisages a mechanism wherein a share of profits and royalties from mining activity could be shared with the local communities who have been displaced, or used for development of local infrastructure. For super-rich mining corporations, this sharing of profits is obviously complete anathema and their stocks in the share market immediately fell in an orchestrated reaction and protest.

In the midst of the furore that the MMDR 2011 has created in the mining sector, it is important to note that the bill finally approved by the Cabinet (according to which non-coal miners have to pay an amount equal to royalty) is a diluted version of the original draft, which had recommended that all mining companies (and not just coal miners) should share 26% of their profits with the local community as annual compensation. Royalty rates vary from mineral to mineral – they are either calculated on a per tonne basis, or else they are a fixed percentage (ranging from 0.2% to 20%) of the total value of minerals mined. Currently, state governments charge 10% royalties on total value of iron ore mined, while the royalties for zinc, copper, lead and bauxite are 8%, 4.2%, 7% and 0.5% respectively. In any case, royalties extracted by the state government are most often not a substantial proportion of the total profits.

It is well-known that coal mining is still predominantly in the public sector, while mining of other minerals such as iron ore and bauxite has been rapidly privatized. Clearly, the Tatas, the Jindals and other private players like the Reddy brothers, who have huge stakes in the mining sector, have pressurized the UPA to reduce the amount they have to pay as benefits to the local community. What we are seeing is yet another evidence of the State policy to “nationalize the losses and privatize the profits”! How else can one explain why the new legislation stipulating profit sharing will apply only to coal and not to other minerals dominated by private sector miners?

Even before the proposed bill gets tabled in the Parliament, there are ample indications that yet more concessions for the mining sector is in the pipeline. Back in June 2011, Reuters had reported a ‘Ministry source’ as having assured the mining industry that while the bill is likely to retain a reference to 26 per cent as a ‘ballpark’ figure, it would include a clause that would allow companies to approach the government for a “concession”! In other words, the final legislation might provide a loophole wherein industry-friendly governments can reduce or waive off the 26% profit-sharing clause! In the days to come, one will have to keep a close watch to see what the final MMDR has in store.

There is absolutely no doubt that mining companies make obscenely high profits, which certainly do not reach the people who live in mineral-rich areas. Therefore, any step towards changing this situation is welcome. However, one also needs to understand what ‘profit-sharing’ will actually mean. Essentially, it will mean more money available for the state to spend for ‘local infrastructure’ like hospitals and schools – basic needs that the state should anyway be providing. After all, people should not have to give up what little they do have (homes, land, livelihood) in order to access these basic facilities! It might also mean some money or ‘remuneration’ for people as compensation for having lost their only source of livelihood. Is this what the people in mineral-rich areas really want? Are they only demanding a share of profits?

In Jagatsinghpur for instance, the main concern is the loss of livelihood that will happen if the POSCO project comes up. The people of Jagatsinghpur know full well that “profit sharing” will not address this concern; it will not provide jobs or an alternative livelihood. It is precisely for this reason that people in several mineral-rich areas in Jharkhand, Orissa and Chhattisgarh have rejected “lucrative” compensation packages that even offer company shares.

In designing a mineral policy for the entire country, it is important to ask: will state policy be decided by corporate profits, or by the larger interests of the people? Today, there is an urgent need to rethink our mineral policy – how much to mine, where to mine and more importantly where not to mine, how to utilise our mineral resources, whether or not to export minerals, and so on. These questions cannot be given short shrift by merely talking about ‘profit-sharing’. And unfortunately, this is exactly what the MMDR has ended up doing.

The UPA is crystal clear about why the new MMDR 2011, with the profit-sharing clause, is needed – Coal minister Prakash Jaiswal says that the new bill is all about “speeding” up the land acquisition process! The spectre of the prolonged and spirited resistance to POSCO and other projects has clearly forced the UPA to think of new methods to defuse public anger against mining projects, and the MMDR 2011 is the result. Several provisions of the MMDR make the intentions of the UPA even clearer. According to the MMDR 2011, mining leases as large as 100 square kilometers can be granted to a company and the time frame for granting various permissions has been reduced. Gram sabha “consultation”, and not approval, will be mandatory in tribal areas before mining leases are allotted.

The NMP 2008 advocated pro-industry concepts of ‘seamless transfer’, ‘security of tenure’ and ‘voluntary compliance’. MMDR 2011 is the logical culmination of the NMP 2008, which promotes large-scale mining, shifts the balance in favour of the private sector and uses all social and environmental jargons while deliberately leaving the mechanism to tackle them open-ended and vague.