Court’s Verdict on Coal Block Allocation an Opportunity to Reform India’s Mining Sector

Coal Mining in IndiaNew Delhi - In its final verdict on the coal block allocation case delivered on September 24, 2014, the Supreme Court of India has cancelled 214 coal blocks that were allotted since 1993.

The verdict follows the apex court’s earlier pronouncement on August 25, in which the court had said that all 218 coal blocks allocated between 1993 and 2010 are illegal as they have been allotted in an “ad hoc and casual” manner by the Centre.

In its most recent judgment, the court has pointed out that its “proceedings are intended to correct the wrong done by the Union of India….. it is expected that the government will not deal with the natural resources that belong to the country as if they belong to a few individuals who can fritter them away at their sweet will.”

Commenting on the verdict, Centre for Science and Environment (CSE) Deputy Director General Chandra Bhushan, who also heads CSE’s Sustainable Industrialisation Programme, said, “The Supreme Court’s observations give us the opportunity to evaluate what can be the most transparent and competent way to allocate a high value natural resource such as coal for mining purposes and ensure its efficient use.”

He added, “In fact, the court’s intervention provides an excellent opportunity and window to initiate reforms in the entire mining sector. The issue of appropriate allocation and extraction of mineral resources and the unfair distribution of costs and benefits realised from such resource extraction is a long standing controversy. Mining in India suffers from multiple problems. Most mining areas are very poor (most mining districts being the poorest) and have major environmental problems (most mining areas are also critically polluted), and there is illegal mining happening across the country.”

CSE’s Recommendations

CSE researchers point out that India’s existing regulatory mechanisms and institutions are not fit to deliver results in the 21st century. CSE has put forth some key recommendations on this subject:

  • Stop captive mining, do open auctions, bring in transparency and accountability: Given the inefficiency and non-transparency in functioning of captive coal blocks, India should move away from captive mining. New allocations should be done through open auction to mining companies. Initiate a transparent and accountable system of granting and renewing mine leases, based on past social, financial and environmental performance of the company. Discretionary provisions in mine allocations must be removed.
  • Begin auctioning only after all environmental and social issues are sorted: These issues would include proper exploration, getting all clearances, settling public claims including those of resettlement and rehabilitation (R&R), land acquisition, etc.
  • Realise the clearances that have already been granted: It is often argued by industry that green clearances have been a bottleneck for mining activities – statistics say otherwise. In the case of coal, between April 2007 and August 2014, more than 260 coal mining projects with a cumulative production capacity of about 823 million tonnes (MT) per year have been given environmental clearance. If clearances given to coal mines during the last seven years, are realised, then this combined with India’s current production capacity of 566 MT, is more than sufficient to meet the country’s projected demand of 980.5 MT in 2017 (terminal year of the 12th Five Year Plan).
  • Capture the windfall profits for society: The windfall profits in the mining sector must be captured and used for the society/community and not for private gain. What happened with iron ore mining in Karnataka, Goa and Odisha must not be allowed again.
  • Share mining benefits with affected communities: Any revision of the MMDR Act, 1957 must include the provision of benefit-sharing with local communities. The draft MMDR Bill, 2011, which lapsed early this year, had a provision of sharing profit with all affected communities. The suggested profit sharing provision (26% profit sharing/100% royalty sharing) in the Bill would have generated at least Rs. 10,500 crore every year as share of profits for communities. Said Bhushan, “If operationalised, such a provision will go a long way in reducing poverty in the mining regions of the country, without reducing the profitability of the companies or making mining unviable in any way.”
  • Involve people in decision-making: Since mining affects local populations the most, it is only fair that the opinion of these people should play an important role in deciding the way mining should be conducted. The Gram Sabha should be consulted and Free Prior and Informed Consent (FPIC) should be made a mandatory provision.