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[Rakesh Iyer]

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I don't agree completely with the ideas mentioned in the given article, yet
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Rakesh

Article Theme: The Excesses of Mining

Source: Frontline

Date:  *Volume 27 - Issue 14 :: Jul. 03-16, 2010*

Link:  http://www.frontlineonnet.com/stories/20100716271400900.htm

Article Content:

*COVER STORY*

* Liberalising loot *

 C.P. CHANDRASEKHAR

 * The mining sector is seen as one in which the worst features of
capitalism as a profit machine combine with illegality and corruption.

*

AFTER being off the radar of public attention for long, the mining industry
in India is now in focus. For example, the controversies surrounding the
Posco and Vedanta projects in Orissa, involving the acquisition of large
tracts of land for mining purposes, have drawn attention to the damage that
could result to livelihoods and the ecology from mining. More recently, in
distant Karnataka allegations of collusion between mining interests and
politicians in power, leading to large and not always legitimate profits
garnered at the expense of the local people and the state exchequer, have
led to the resignation of the State's ombudsman.

The mining sector is increasingly seen as one in which the worst features of
capitalism as a profit machine combine with illegality and corruption to
provide a site for primitive accumulation based on plunder and unequal
exchange. This is only partly because after economic liberalisation mining
has delivered fortunes to those private interests that have been able to
find a foothold in the industry. The industry has also drawn attention
because mining areas have become the sites of violent political opposition
to both private capital and the state.

Analyses of the reasons for these developments point in many directions.
Displacement, loss of traditional livelihoods of tribal populations and
ecological destruction are, of course, prime among them. In addition, in
some regions and States mining interests from “outside” reportedly rule the
areas they exploit by maintaining private armies or by entering
parliamentary politics to win influence and control the administration of
mining areas and the framing and implementation of mining policy. Power at
one pole, especially if violently exercised, generates dissent and
opposition at the other, which too can turn violent.

This kind of “carpetbagger capitalism”, in which wealth accumulation by
“outsiders” who extract mineral resources occurs at the expense of local
populations, whose traditional habitat and means of livelihood are damaged,
is not specific to mining in India. It is true of all locations where the
state has not either regulated mining firms or interests or even worked in
their favour when resources are being mined.

Mineral resources are non-reproducible and, therefore, the duration for
which they can be exploited is limited and the returns from mining dwindle
as the best quality ores and the most accessible strains are exhausted. On
the other hand, for geological reasons, individual mineral resources are
concentrated in particular regions of the world and in specific areas within
those regions and nations. Rising global demand, irrespective of where it
emanates from, therefore, encourages the quick exploitation of available
mineral resources from a few locations.

The difficulty is that in most cases mining, which requires “extracting” the
resource, is destructive of the environment in which it occurs. Large
swathes of land have to be excavated. If the area has forests, they have to
be cleared. If it is inhabited, the local population has to be relocated and
rehabilitated. If water is required for mining purposes, local water sources
must be drained. And if the process of mining releases toxic material,
ecological and human damage through pollution of various kinds will occur
unless efforts are made to collect those materials and put them to use or
they are disposed of safely.

The dimensions of the problem are not easy to understand. Consider the
situation in India, for example. Taking a national view, mining does not
seem to be an overwhelmingly important activity in the country. The mining
and quarrying sector currently contributes only around 2 per cent to India's
gross domestic product (GDP). Further, more than 60 per cent of this value
is due to fuels, a significant share of which is produced offshore, away
from human habitation. Offshore areas accounted for 18 per cent of the value
of mineral production in 2009-10. (Though, this seems to shift the problem
away from where it affects us humans, the BP spill in the Gulf of Mexico
should remind us that even this is not true.) The resulting seemingly
minimal economic relevance of mining conflicts with the role it is
increasingly playing in generating discontent and opposition within the
country.
*

Mining & political conflict
*

However, the reasons why mining areas are the sites for political conflict
are many. To start with, where the adverse effects of mining are
inadequately remedied, the consequences for the affected can be dire.
Secondly, though, according to the Ministry of Mines, India produces as many
as 86 minerals, a few minerals account for a dominant share of non-fuel
mineral production. These include coal, lignite and bauxite (in which India
ranked third among the world's producers in 2007-08), iron ore (fourth) and
manganese (fifth). Moreover, these resources are concentrated in a few
contiguous areas.

During 2009-10, while mineral production was reported from 32 States and
Union Territories, among onshore areas a few States dominated: Andhra
Pradesh (with a 12.24 per cent share in production by value), Orissa (11.85
per cent), Chhattisgarh (9.18 per cent) and Jharkhand (8.79 per cent).
Together with the offshore areas, they account for 60 per cent of mineral
production by value. They also are home to large tribal populations. And
they are among the States where violent political movements are on the rise.

It is nobody's case that no mining should occur. The case is clearly for
restricting the extent of mining, keeping in mind the common good and taking
into account immediate and long-term costs and returns. In fact, almost
everybody swears by certain principles. While different mineral resources
should be exploited to differing degrees, given the technological options
and the benefits from production using mineral raw materials, the effort
should be to minimise the social costs.

Ecologically sensitive areas should not be mined. Deforestation should be
kept to a minimum. Compensation, relocation and rehabilitation must be
organised in ways that are fair. And pollution should be minimal after
abatement.

However, recognising all this is not enough. There must be laws,
institutions and processes in place, which ensure that decisions on the
extent and means of mineral extraction in different locations are taken in
ways that ensure social participation, especially of those who will be
affected adversely. The fact of the matter is that while lip service is paid
to such institutions and processes, they do not work in this country (and in
many others in the world as well).

In fact, the complex division of labour between the Central and State
governments with regard to the framing and implementation of mining policy
obfuscates accountability to a substantial degree, only worsening matters.

This has become more of a problem in recent years because of the ways in
which the post-1991 policy of economic liberalisation and “reform” have
affected the mining sector. As noted above, mining is an area where most
costs are social and fall heavily on those not directly involved in mineral
extraction.

If in such an environment private producers operating purely for profit are
given an important role, it generates the classic situation where private
returns and social costs diverge substantially, especially when private
returns are high and social costs are not required to be compensated for.
*

Preserve of state
*

This situation is relatively recent in India's post-Independence history.
During much of that period mining was largely a preserve of the state. Under
the Industrial Policy Resolution, 1956, the mining of major minerals such as
coal, lignite, mineral oils, iron ore, copper, zinc and atomic minerals was
made the exclusive preserve of the public sector.

It was only in the extraction of minor minerals that the private sector was
allowed along with the public sector. As a result, much of the mining
occurred within the ambit of the public sector. Even today, the public
sector continues to play a dominant role in mineral production, accounting
for more than 70 per cent of the total value of production.

It is of course true that the operations of the public sector, too, resulted
in displacement, ecological damage and loss of traditional livelihood
opportunities. But with the public sector under managements that were
accountable to Parliament, the degree to which it could ignore social costs
was limited.

Moreover, with the public sector not under pressure to privilege profit
above all else, it was in a position to provide for compensation,
rehabilitation and abatement. The system was not inherently biased towards
discounting the social costs of mining operations.

Under that regime, therefore, the problem was largely one of inadequate
investment to exploit effectively and safely the mineral resources of the
country. In fact, even when shortages in some areas encouraged small-scale
illegal mining, it was often more in the nature of petty production,
sustained of course by the presence and exploitation of large trading
capital.
*

Mineral policy
*

Matters began to change in the 1990s, with the post-liberalisation shift to
the National Mineral Policy (NMP) of March 1993. Designed to encourage
private investment in exploration and mining, the policy opened up 13 major
minerals – iron ore, manganese ore, chrome ore, sulphur, gold, diamond,
copper, lead, zinc, molybdenum, tungsten, nickel and platinum – for private
investment. Further, the policy expressly provided for foreign technology
and foreign participation in exploration and mining. Initially, foreign
direct investment (FDI) was allowed, subject to clearance by the Foreign
Investment Promotion Board (FIPB), up to 50 per cent of equity (with no
limit for captive mines). However, additional FDI holding was provided for
on a case-by-case basis. In 1997, FDI up to 50 per cent was taken out of the
purview of the FIPB and put on the automatic approval route, and in February
2006 FDI up to 100 per cent was permitted in mining.

Though the initial response to liberalisation was lukewarm, there has been a
rush of investment into the area in recent years. According to an estimate
made by the Indian Institute of Metals in 2009, a sum close to $300 billion
is expected to be invested in the metals and mining sectors in eastern India
over the next few years. This is six times the aggregate investment made
since Independence. Much of this investment is to occur in the mineral-rich
States of Orissa and Jharkhand followed by Chhattisgarh and West Bengal.

The government has argued that this liberalisation, introduced to attract
much-needed investment into the mining sector, has been accompanied by new
rules, guidelines and measures to ensure that the benefits are distributed
fairly. The opposition and civil society activists, on the other hand, argue
that there is no tooth to whatever legislation is in place and little
commitment to implementing many of the regulations that are available. The
state is most often seen as colluding with private operators at the expense
of local populations.

As a result, argue critics, in a State like Orissa the rapid pace of mineral
exploitation has contributed little to the development of the State.
According to a study by Banikanta Mishra ( Economic & Political Weekly, May
15, 2010), from 1993-94 to 2003-04, the extent of mineral exploitation
increased by 10.3 per cent a year, with the value of minerals extracted
rising at 12.8 per cent per annum. Much of this was for export, with the
quantity of mineral exported out of the state rising by 15.7 per cent a
year. On the other hand, the number of workers employed in mining fell by 4
per cent annually, even while ecological damage and livelihood loss worsened
standards of living.

That there is reason for cynicism is illustrated by the delay in formulating
and approving appropriate alternative legislation to replace the Mines and
Minerals (Development and Regulation) Act of 1957. The Ministry of Mines is
pushing for legislation that mandates, among other things, the sharing of
profits from mining with the local population and State governments.

The new law seeks to make sharing of at least 26 per cent of profits with
the local population mandatory. According to reports, the Law Ministry,
influenced by other sections in government, is opposed to these changes.
Union Minister of Mines B.K. Handique, who has been vocal on the matter, has
reportedly received no response to his efforts to get the draft legislation
cleared and taken to Parliament.

Clearly then, the ethos of liberalisation, which privileges private sector
production and celebrates profit–making, is one in which an appropriate
mining policy will prove difficult to formulate, let alone implement. Public
control over mining rights and mining activity in the pre-liberalisation
period was not driven by socialistic motives but by the recognition that a
sustainable mining strategy cannot be evolved when the activity is
undertaken privately. The retreat from an interventionist policy, the
evidence suggests, delivers the kind of outcomes that enhances the wealth of
some while increasing the deprivation of the majority in India's mining
belt, leading to violent forms of protest.

The message is clear. Liberalisation is not a means of increasing the
efficiency of the system. It is a policy that facilitates a process of
primitive accumulation that leads to social disruption.