Govt to ask miners to share profit to quell unrest

Fri Jun 4,
NEW DELHI (Reuters) – The government plans to force foreign and domestic mining firms to share a quarter of their net profit with local communities, seeking to undercut a sense of alienation among its rural poor opposed to giving up land for industry.

In a country where two-thirds of the population lives on farming, the government has struggled to provide land to industry, fuelling a growing Maoist insurgency and a wider resentment that foreign firms are being allowed to displace poor people and cart away natural resources.

“The idea is to create a win-win situation by enabling miners to mine and local people to genuinely benefit,” S. Vijay Kumar, special secretary in the mines ministry, told Reuters.

“But that win-win has to come out from the parting of a greater share of profits (by mining companies), so that local people do not see mining as a threat to their way of life but as an opportunity for progress and development.”

The new mining bill has to be passed by parliament. It was not clear yet whether the profit to be shared would be from a company’s overall operations in India or a particular mine.

Years of protests, sometimes violent with backing from the Maoists, have delayed many projects, including India-focused miner Vedanta Resources Plc’s bauxite mines and POSCO’s proposed steel plant in Orissa.

It has now led to a growing realisation in the ruling Congress-led coalition as well as state governments that economic progress must include local stakeholders and industry must secure “social licence” to overcome hostility and speed up projects.

The proposed law is being seen in the context of the government’s expanding social programmes that seek to keep poor voters, its core support base, happy and away from the Maoists while also balancing modernisation with traditional ways of life.

This could impact local mining companies including listed companies such as Sesa Goa, Sterlite, Tata and the Steel Authority of India, besides global giants such as Rio Tinto and BHP Billiton.

Land acquisition for large projects, often forcible, and poverty have boosted the appeal of Maoist rebels in eastern and southern states, home to many deprived tribal communities.

Prime Minister Manmohan Singh has described the Maoists as India’s biggest internal security challenge, an insurgency that has appeared to be spinning out of control with 400 people already killed this year.

The rebellion, present in mineral-rich rural pockets of 20 of India’s 28 states, may not yet be a threat to its trillion-dollar economy, but mining firms have long felt the heat.

The world’s leading steelmaker Arcelor Mittal’s plans for two plants in eastern India have already faced a two-year lag.

Frequent rebel strikes have hit production and shipment at firms such as India’s largest miner of iron ore, NMDC Ltd’s and state-run National Aluminium Co Ltd.


Maoist rebels extort about $300 million from companies in India every year in protection money, police and officials say. Local resentment has also often been fuelled by uncontrolled mining in some areas.

Kumar said the bill will also help crack down on illegal mining, an issue now in the spotlight due to a proactive environment ministry.

“This will bring tighter regulation, more stringent penalties. Besides issues of profitability, this is perhaps one of the reasons why there is opposition (to the bill) from mainly some vested interests,” he said.

India, with about 85 billion tonnes of mineral reserves yet to be exploited, has set a target of increasing foreign investment to $20 billion over the next few years.

But exploration companies have shied away from India because the current mining law in India does not allow mining concessions to be transferred from one company to another.

The law seeks to allow mining concessions to be transferred, Kumar said, adding this will enable exploration of deep-seated mineral deposits, particularly copper, zinc, gold and platinum.

(Editing by Paul De Bendern)

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