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How Not To Use A Development Fund For Mineral-Rich Areas

A stone mine near Samodi village in Bhilwara district, Rajasthan. The Pradhan Mantri Khanij Kshetra Kalyan Yojana empowers India’s mining districts to levy a charge on mining operations to create a fund for development of surrounding areas. The fund in Bhilwara has over Rs 400 crore so far.

 

Bhilwara, Rajasthan: Like much of Mewar in Rajasthan, Bhilwara has rich reserves of prized granite and base metals such as iron, zinc and lead. Mining companies such as Hindustan Zinc and Jindal Saw have invested hundreds of crores in the region, yet Bhilwara remains underdeveloped on most socioeconomic indicators.

 

There is water shortage and contamination throughout the district. Roads are non-existent or potholded. The rates of child marriage and female illiteracy are high. And at least 1,000 mine workers are afflicted with silicosis, an incurable disease caused by fine silica dust released from mineral mining operations.

 

This is the case with most mineral-rich areas across India, where mining has not only failed to benefit local residents but has degraded lands and rivers and destroyed traditional livelihoods. It is this anomaly that the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) seeks to remedy by creating a corpus for local area development from a levy on all mining operations.

 

A great idea in theory, PMKKKY’s implementation so far has been less impressive. IndiaSpend’s investigation in Bhilwara shows a district administration treating the PMKKKY funds as an extension of existing government funding, displaying no better planning, targeting or urgency. Implementation is entirely top-down, so much so that villagers have not even heard of PMKKKY. Planning is piecemeal and short-sighted. Members of the legislative assembly (MLAs) have established too much control over the funds. And the mining department does not have enough staff or expertise to handle the task it has been entrusted with.

 

Bhilwara had collected an impressive Rs 400 crore by October 7, 2017–compare that with the district’s health budget of Rs 23 crore for the current year–yet the fund lies unutilised.

 

This second part of our two-part series on PMKKKY examines whether there is a better way to handle and use PMKKKY funds. The first part detailed why Bhilwara, and other mining regions, need a development fund (read it here).

 

How a District Mineral Foundation works

District Mineral Foundations (DMF) are independent trusts set up by the government under a 2015 programme called the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKY, or Prime Minister’s Development Programme for Mining-Affected Regions).

The foundations manage a trust fund created from a levy on mining companies. Those mining major minerals (such as copper, tungsten and coal) must pay an amount equivalent to 30% of the royalty of a mine leased before 2015 towards the fund; all mines leased after 2015 as well as those extracting minor minerals (such as marble and granite) must pay 10% of the royalty.

DMFs comprise two committees, the makeup of which is decided by the state government. In Rajasthan, the managing committee is headed by the district collector, while the governing council, which has the final say on any decision taken, is headed by the Zila Pradhan (who is elected by and from among all district-level elected office-holders including sarpanches (elected village heads) and MLAs).

Upto 40% of PMKKKY funds can be used for physical infrastructure such as roads and bridges, irrigation projects, power supply and watershed development. The remaining 60% or so are to be used for social development purposes such as education; environment and pollution control measures; healthcare; drinking water supply; welfare of women, children, the aged and the disabled; skill development; and sanitation.

These committees, in consultation with other government departments such as public works, water and education, decide which areas and people are categorised as mining-affected, allocate the fund, approve projects and monitor their implementation.

 

Top-down implementation

 

DMF’s success will depend on the extent to which it is able to democratise planning, decision-making and implementation, Chandra Bhushan, deputy director-general of the Delhi-based research and advocacy group Centre for Science and Environment (CSE), told IndiaSpend. CSE has been tracking DMFs across India and is helping some districts prepare a plan to better utilise the funds. “At the end of the day, this is not the government’s money… It’s people’s money and therefore people should have the right to decide where they want to spend this money,” he said.

 

Few villagers IndiaSpend interacted with knew of PMKKKY or the fund, making it unlikely they had been consulted or in any way involved in the decision-making.

 

In the village of Nayanagar, residents said their biggest problem is water shortage–borewells have to be dug deep yet go dry in the summer. When IndiaSpend told them about the fund, they said they would want a groundwater recharge project, perhaps one that would build a check-dam on Banas river that flows 30 km from the village.

 

The DMF has proposed projects involving borewells and solar pumps, but villagers say these will not work. “A recently installed hand pump is already not working,” said Prabhu Gurjar, a farmer who travels to Mumbai as a migrant worker in the off-season.

 

District officials said a check-dam on the Banas may not be feasible, but admitted that no one had suggested this or any other water recharge proposal under the DMF for this village.

 

The other problem in villages, according to officials from the public health engineering department of Jahazpur block, is excess fluoride in the water, which can cause stained and pitted teeth in children, and pain in the joints and even bone deformities.

 

A reverse osmosis plant has also been proposed for the area, but it will not cover the village of Nayanagar as it does not receive piped water supply, Dheeraj Gurjar, a Congress MLA from Jahazpur, told IndiaSpend.  

 

Clearly, villagers and officials are not on the same page, yet there is currently no plan to create awareness about the fund. Government officials and MLAs said word will spread as projects begin on the ground, but those projects would have been planned and executed entirely top-down.

 

“In a democracy, there are representatives of people. In my opinion we have received proposals from the ground through this channel,” Kamleshwar Baregama, a senior mining engineer with the mining department in Bhilwara, who is also the secretary-general of the two DMF committees, told IndiaSpend.

 

Civil society organisations disagree. “Seventy years of democracy in this country tells us that we have to start putting more faith in participatory democracy and not only electoral democracy,” Bhushan of CSE said, emphasising that there are accountability gaps in electoral democracy.

 

Incomplete information

 

The grassroots experience so far has been disappointing. “Even if transparency is talked about as part of the law, it is difficult to find out things about the DMF,” Nikhil Dey of Mazdoor Kisan Shakti Sangathan (MKSS), a Rajasthan-based grassroots movement, told IndiaSpend.

 

For instance, the mining department is not making public the projects it is considering through the DMF. When asked, the department said only the list of approved projects would be made public.

 

Every district’s DMF is supposed to have a website detailing the money in its fund, minutes of every meeting, the current status of implementation of projects and so on. Bhilwara DMF’s website is still under construction.

 

As much as 85% of Bhilwara is affected by mining and its undesirable fallouts, as IndiaSpend reported in the first part of this series. This includes villages on or near mining lands, areas lying in the path of wind or water flow from mines, as well as mining dispatch regions such as the paths of trucks ferrying minerals.

 

However, there is a lack of clarity on some issues, for instance, whether silicosis-affected mine workers who live in villages not considered mining-affected are eligible for benefits under the fund. For such people, the government “would need to conduct a ground survey for which there is currently no manpower”, said Baregama, the mining engineer.

 

Even where a more participatory process is followed, there is incomplete information. For instance, panchayat heads, when asked to send proposals, are unaware of the PMKKKY law and its provisions. Kailash Chandra Suthar, sarpanch (village head) of Kankroliya, said he found out about the DMF from an MLA and the zila pradhan (literally, district head, president of a directly-elected district council). “They told me there is a lot of money, and that we should send proposals of projects we would like to undertake,” he said.

 

Suthar said he sent proposals for about Rs 8 crore–Rs 5 crore for a bridge over a small stream that overflows in the monsoons, Rs 2.5 crore to repair a road, Rs 25 lakh for a check dam, and Rs 2.5 lakh for solar pumps–but that he had made these choices based on limited information. He did not know what size of projects he could propose, or the priority areas suggested under the law, he said, but had been informed that all his proposals had been approved and he could send new proposals when more funds come in.

 

Suthar’s experience, despite the lack of information, shows how participative democracy can work when the PMKKKY is implemented well.

 

The district mines department, however, says it is flooded with unviable proposals. “People are not aware of the guidelines and they send proposals of projects that are not within the scope of the law,” a local government official told IndiaSpend, not wishing to be identified. The department had received 3,696 proposals by September.

 

MLAs had started submitting project proposals even before the DMF had identified mining-affected regions, blocks and panchayats. Despite being members of the governing council, which takes final decisions for the DMF, many MLAs did not seem to have much knowledge about the fund. Ramlal Gurjar, a Bharatiya Janata Party (BJP) MLA from Asind constituency–where there is an acute water shortage in several areas, and fluoride-contaminated water in some villages–said he “knew a little about the fund”.

 

Gurjar said he had proposed roads in mining areas, construction of classrooms, piped water and borewells, among other projects. On being asked whether anything had been proposed for silicosis patients in Asind, he said, “We’ve previously provided some funds for medicines for silicosis patients but nothing has been proposed under the DMF.”

 

Stakeholders disagree

 

Various stakeholders want a say in how the funds are used. Mining companies see it as their money and want to be involved in how it is spent (the law in Rajasthan says mine owners have to be represented on the governing council). Some of the largest payments come from Hindustan Zinc’s mine in Rampur Agucha in northern Bhilwara, and Jindal Saw’s mine near the village of Dedwas in southern Bhilwara.

 

Companies Making The Highest Payment To The Bhilwara District Mineral Foundation
Company Minerals Payment to DMF(Rs crore)
Hindustan Zinc Limited Lead and Zinc 395.26
Jindal Saw Ltd. (2 mines) Gold/Lead/Zinc/Copper/Iron/Cobalt/Nickel 10.26
Udaipur Mineral Development Syndicate Soapstone and Dolomite 1.22
Mine Owned by Sanjay Kumar Garg River bed mining 0.89
Mine Owned by Mahendra Singh Rajawat River bed mining 0.22

Source: Data collected from the Bhilwara Mines Department, as of October 7, 2017

 

The government sees it as its own fund. Activists say the money belongs to the people who have been impacted by mining.

 

Consequently, there is disagreement on the fund’s role. Activists feel the district would do better with some guidance on implementing the law as it is new and different from other government programmes. But government officials disagree. “Nothing new is being asked of them. We are not asking them to develop a rocket,” an official from the central government’s ministry of mines told IndiaSpend, asking not to be named. “It’s the same kind of projects in a more targeted way to one area. What training do you require to use these funds?”

 

The same kind of projects done in the same way is not the best way forward, Dey of MKSS said: “The greatest danger to the fund is that it will become just another development/infrastructure government programme that will be prioritised as per the MLAs and bureaucrats, and not help those who are most affected by mining.”

 

If the programme does not succeed, it is not because “the scheme is bad. The scheme is not working because we have not prepared the institution to deliver”, Bhushan said.

 

Slow process

 

The first meeting of the Bhilwara DMF’s managing committee took place in October 2016, but things did not start moving until September 2017. “The meetings kept getting postponed. Sometimes because of administrative reasons. Sometime because key people, such as the speaker of the Rajasthan assembly who is also an MLA from Bhilwara, couldn’t attend,” said Kalu Lal Gurjar, a BJP MLA from the Mandal constituency in Bhilwara, and a member of the DMF’s governing council.

 

The state government approved the nomination of members (the law empowers the district to recommend nominated members and the state government to approve) to represent mine workers and mine-affected persons only in September 2017.

 

The speed at which this system is established, and the law implemented, is completely up to the district, a central government mines department official told IndiaSpend. The law mandates a minimum of two meetings in a year, but the district can have as many as members want and send as many proposals as often as they like. “The speed of the implementation completely depends on the stakeholders,” he said.

 

Lack of long-term planning

 

Of the proposals received, the mines department discarded 394 projects outright for not involving mining-affected areas and 574 for not coming under the scope of DMF work.

 

In all, 1,803 projects together costing about Rs 250-300 crore, were deemed viable and necessary and are now being scrutinised by the governing committee with help from the relevant government departments (education, health and public works). These pertain to projects to assist silicosis patients, create training centres for women, and build education and health infrastructure.

 

“People want to do projects that are tangible because locals can see it and credit them for it,” a Rajasthan state government official, who requested anonymity, told IndiaSpend, explaining that projects to improve learning, nutrition or health outcomes, often more meaningful, are not undertaken because they lack visibility.

 

Because they do not lapse, DMF funds offer a rare opportunity to plan for long-term development. “It is fine if you spend a year preparing the plan,” Bhushan of CSE said. “So that when you start investing, then you do it properly. We are saying you could [immediately] spend some amount of money on drinking water, sanitation etc., perhaps 10-15%, but for the rest, plan well.”

 

However, he said, as of now DMF projects in many districts are being chosen in an ad-hoc manner from among piecemeal, unconnected proposals. He suggested making a three- or five-year plan after thorough research into all existing programmes and the problems they seek to address. “You understand the area, you do focus group studies, you involve gram sabhas, and then come out with a three-year or a five-year perspective plan and then decide how money will be spent every year,” he said.

 

Officials and MLAs involved with the fund, however, do not see the need for long-term planning. “The money is coming daily. We’ll spend now, and in another six months there will be more money,” Kalu Lal Gurjar, the Mandal MLA, said.

 

Kalu Lal Gurjar, an MLA from Mandal constituency in Bhilwara, Rajasthan, is a member of the governing council of the district mineral foundation. Gurjar said there is little need for long-term planning to utilise the money collected under the Pradhan Mantri Khanij Kshetra Kalyan Yojana as the corpus will be constantly renewed from fresh levies.

 

Some officials agree on the need for better planning and preparation. “It is a huge amount. We have to understand how to streamline the process and the money. For instance, if a department’s budget is Rs 10 crore, you are now telling them to handle Rs 40 crore,” said Muktanand Agrawal, the district collector of Bhilwara, and head of the DMF’s managing committee. “It should establish a system,” he said, explaining that the system should work even when the people in charge (MLAs and bureaucrats, for instance) change.

 

Needed: Less political interference

 

The law in Rajasthan makes all MLAs members of the the DMF governing council. Not all states have this provision, and activists say it may allow politics to influence decision-making. State-level officials and civil society organisations, even as they emphasise the need to involve MLAs, suggest they should have limited power in project selection. “MLAs look at it as a source of income,” Dey of MKSS said. “The DMF shouldn’t become another MLA fund.”

 

Mining department needs more hands on deck

 

The mining department controls the fund and how it is used, even though they have no expertise in undertaking the works this fund is to be used for.

 

“This might slow down the process, and other people involved won’t take full responsibility. The mines department also wants control because they feel it’s their money in some way,” the state government official said. Further, the district requires permission from the state government for projects that cost more than Rs 1 crore (about $153,000) which could also slow the process down.

 

The mining department in Bhilwara does not have the manpower to manage the fund, and officials said they would request help from other government departments. The law in Rajasthan says the government can spend up to 5% of the DMF funds for administrative purposes. Mining department officials say they are working overtime, in addition to their regular duties, on DMF.

 

Streamlining some processes would speed up implementation. For instance, mining companies cannot transfer funds to the DMF digitally, and enabling this would speed things along and make it easier for companies to comply.

 

Some of these are certainly teething problems–the information asymmetry, the lack of clarity over who is eligible or not, the transition to an online payment system, and so on–which will get resolved in due time. It is the more entrenched systemic problems, such as political interference and lack of long-term planning, that are more worrisome and difficult to overcome.

 

“I am going to give it another three-five years before I make a judgement that this scheme has failed or not…it is too early to say,” Bhushan of CSE said, adding that he has seen encouraging signs in some districts. “In a small district like Ramgarh [in Jharkhand], where hardly anyone would have gone to IIT, DMF money is being used to give scholarship and tuition to bright students.”

 

IndiaSpend Solutions

  1. Long-term planning: Analyse all existing programmes as well as sources of funding in the district before allocating PMKKKY money, Chandra Bhushan of the Centre for Science and Environment suggested. There should be thorough analysis of the major issues facing a district, and gram sabhas (village councils) must be part of all consultations. Targets, financial allocations and deadlines must be clearly defined.
  2. Involvement of local people: Villagers, mine workers, panchayats, as well as local civil society organisations must be consulted to understand the needs of mining-affected areas. Decision-making should not be in the hands of political representatives and bureaucrats, and should prioritise those affected by mining, such as silicosis patients, Nikhil Dey of the Mazdoor Kisan Shakti Sangathan said.  
  3. Transparency: Implementation should be transparent–a website should track the monies collected, display a list of mining-affected villages and peoples, the projects proposed, and their status of implementation, as mandated under the central government guidelines for PMKKKY. There should be a mechanism for villagers to know about the projects undertaken in their area, activists say.
  4. Monitoring: There should be independent third-party tracking, monitoring and evaluation of projects; a chartered accountant should audit financial records, as suggested under PMKKKY guidelines. Gram sabhas should be informed on a yearly basis about the works undertaken.
  5. Involvement of mining companies: Mining companies should not be involved in deciding how the PMKKKY fund is used because they do not understand the developmental issues in the area, villagers that IndiaSpend spoke to in Bhilwara said. The money, though it comes from mining companies, should be seen as belonging to people impacted by mining, Bhushan of CSE said.
  6. Guidance and training for district officials: The central or state government, or specially appointed agencies, should help district officials utilise the fund, Bhushan of CSE said.
  7. Political influence: By generating awareness among residents, their participation can be enhanced. DMFs must guard against letting MLAs wrest control over PMKKKY projects and allocations, villagers and officials told IndiaSpend.

 

Series concluded. You can read the first part here.

 

(This story is part of the Publish What You Pay (PWYP) Data Extractors programme. Shah, a writer with IndiaSpend, is a 2017 Data Extractor with PWYP, a group of civil society organisations working for an open and accountable mining sector. Ragini Bafna, an intern with IndiaSpend, contributed to this story.)

 

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View Comments

  • Excellent analysis. Participation of people at grass- root level is important for the success of any development policy and programs