While illegal mining is worrying, what is little understood is the enormous loot that is taking place legally. Mineral owners sometimes receive less than 5% of the value of minerals.
The three iron ore scams in Karnataka, Goa and Odisha have some things in common. There were widespread and diverse breaches of the constitution, laws, rules and regulations. The environment was badly damaged. The minerals were being exhausted. Enormous corruption was apparent, with both the politicians and the bureaucracy likely involved. In turn, miners became politicians, politicians became miners, and crony capitalism bloomed.
In the Odisha mining case, the Supreme Court has responded in three principal ways:
(a) it has clearly defined what is illegal mining, and clarified that under the mining laws, illegal mining requires the return of the mineral or its full value (as would be the case with theft), and jail terms/fines in addition;
(b) it is considering the formation of an expert committee to examine the myriad ways the laws were breached and to suggest appropriate controls; and
(c) after a discussion on inter-generational equity, it directed the government to revisit its National Mineral Policy, with the aim of making it effective.
While illegal mining is worrying, what is little understood is the enormous loot that is taking place legally. Under the pre-auction regime, we calculated that over an eight-year-period (2004-2012), the iron ore mining in Goa resulted in the receipt by mineral owners of less than 5% of the value of the minerals (after deducting all expenses and a 20% post tax return on assets for the miners). These estimates were made using the audited financials of Sesa Goa and volume statistics from the industry body.
In simple terms, we were legally selling minerals worth Rs 100 for Rs 5. While this many have been legal (hence in the audited financials), any sensible person would see it as fundamentally illegitimate. A rational miner with such a deal would extract as much as possible as quickly as possible and exit. Trees, tigers or tribals stand between the miner and fabulous treasure, and are bulldozed with the full force of the establishment – speed is essential. When they resist, we have conflict and our civil war.
Goa isn’t an aberration. Iron ore mining elsewhere in India, coal, oil and gas, and even sand show similar results. And the results from the recent coal and mineral auctions bear out the enormous losses from the non-auction regime. Rs 335,000 crores is the coal auction premium, Rs. 69,000 crores is the subsidy on coal for power, and Rs 94,000 crores in mineral auctions premia. Rs 5 lakh crores.
This Rs 5 lakh crores, much more than the amount of black money found, has come about solely due to the PILs filed by some brave individuals and NGOs. It is a comment on the state of our democracy that instead of rewarding the petitioners, they are routinely vilified and called anti-national.
The 2015 amendment to the mining laws mandated auctions in future. It also contained a provision that extended all existing leases including many that stopped functioning years earlier. These leases are still on the old royalty only basis. In other words, in these leases, we will sell our minerals to the miners for a fraction of their value for the period of extension. One estimate that the loss on account of this provision in Chattisgarh for iron ore is estimated at Rs. 122,000 crores. One state one mineral!
In Goa, there were approximately 120 leases working prior to the ban. In 2014, the Supreme Court found that all iron ore mining in Goa was illegal for nearly five years. Today, there are 89 leases which have been renewed, over half in the week prior to the ordinance, including 31 on the day of the ordinance. And a further 188 leases have been extended by the ordinance. These are all on the royalty only basis. And nothing has been recovered due to the illegal mining.