GoM okays bill seeking mining profit sharing with tribals

Despite strong opposition from the industry, profit or royalty sharing norms in the mining sector are close to being finalised.
The group of ministers (GoM; headed by Union finance minister Pranab Mukherjee) looking into the issue on Friday reached a consensus on sharing 26% of the profits or the previous year’s royalty, whichever is higher, of the mining companies with locally affected people.

The GoM is scheduled to meet again to fine-tune the draft of the Mines & Mineral Development and Regulations (MMDR) Bill, 2010. The government plans to introduce the bill in the winter session of Parliament.

“We have managed to get consensus on most of the things,” said BK Handique, Union minister for mines, after the GoM meeting on Friday.

The consensus on sharing of profits is a direct consequence of the political environment in the country. Recently, Congress general secretary Rahul Gandhi had mobilised Orissa tribals against the mining project of the London-listed Vedanta Resources.

Congress president Sonia Gandhi had also sent out a strong message to the government by saying “displaced people should get enough compensation for the loss of their land”.   

It is to be noted that the UPA government is trying to resolve the issue of Naxal violence, which is seen as a fallout of the neglect of tribals. With the new law, the government hopes to win back their trust.

However, on the economic front, the mining industry has expressed its disappointment on the GoM recommendation. “We need to have more stakeholder consultation to make the MMDR Act reasonable and feasible,” said Anjani Agarwal, national leader (metals & mining), Ernst & Young.

FICCI secretary-general Amit Mitra in a letter to Mukherjee had said recently that “investments in the sector would take a hit as no shareholders would like to invest where 26% of shareholders do not make any contribution to the company”.

Siddharth Rungta, president, Federation of Indian Mineral Industries, said: “This kind of taxation would be difficult to be absorbed by any industry. Because even if a company is loss-making, it will at least have to pay 100% of the royalty paid to the state government. New mining companies will suffer.”