Wednesday, October 25, 2006
A draft letter to the Prime minister -- introducing the issue
Dr. Manmohan Singh,
Our beloved and esteemed Prime Minister of
We, the people of Orissa, appeal to you to change the Mining Laws of our country in a manner which will make it mandatory for the mining lease holders to share a minimum of 50% of their profit with the state. With the current production levels, our state Orissa would get additional revenue of about Rs 4400 crores per annum. This money will be exclusively used for creating the much needed rural infrastructure and for providing livelihood avenues for the hungry millions.
Sir, we have very high regard for you since as the then Finance Minister you saved our country at a very critical time with your rare wisdom on socio-economic development. With your benign intervention, you can help a poor state like Orissa to get rid of poverty and march on the path of prosperity.
As you are aware, our state Orissa with abundant natural and human resources has about 48% of its people living below the poverty line, the highest in the country. The story of south Orissa is still pathetic: here 87% of our brothers and sisters live in utter penury with a meager monthly family income of about Rs 500 compared to monthly income of Rs2000 required to cross the poverty line. In many places they live eating mango kernels, wild leaves and unhygienic roots of creepers grown in the jungle. Is it not shameful for Indians even after about 60 years of independence? The appalling and pathetic living conditions of the tribal and rural poor of Orissa are unthinkable in any progressive civil society. Orissa can no longer afford to slog with this situation when the country dreams of global positioning as a fast developing economy.
While the teeming millions suffer atrociously, a few individuals/companies with mining leases are earning in several crores as profit. Thus the ‘Rich’ is becoming richer and the ‘Poor’ is becoming poorer. It is to be appreciated that the people of Orissa own the land given on mining lease to these fortunate few. While they earn about Rs 650 – 1500 per ton of iron ore after all expenditures, they pay a paltry Rs 25 per ton to the state. Same is the case for other minerals (coal, bauxite, chromite, manganese ore) being extracted in the state. If this is compared with share cropping in agriculture, the owners get 35-50% of the gross produce from the sharecroppers, which accounts for more than 50% profit accruing to the sharecropper. Based on this principle, the mining lease holders must pay a minimum of 50% of their profit to the sate.
Again, the additional revenue to accrue from the mining industry should not make good the deficit of the state finances. This should be earmarked for livelihood projects for the poor, and infrastructure required for that purpose i.e. works concerning rural roads, water harvesting, afforestation, micro irrigation, environmental protection and others, which are not financed under the central schemes.
The sad plight of infrastructure is reflected in the roads in mining areas of Keonjhar and Sundargarh Districts which are so bad that vehicles can not move with more than 10 km/hour speed. In contrast the mine owners have exported from these two districts iron ore worth more than Rs 25000 crore during the last 3 years earning huge profits.
Poverty in Orissa can be wiped out with integrated development approach: area based planning covering every inch of land aiming at optimum productivity; dovetailing family based action plans into that (all the families BPL and APL included); encompassing the saturation concept; adequate investment for livelihood projects; ensuring all backward and forward linkages; providing handholding mechanism for 30 years; discouraging doling out syndrome; and ensuring better health, meaningful education, desired nutrition and ecological balance.
All these require investment of about Rs 1 lakh per family. For 40 lakhs poor families we have to mobilize Rs 40000 crores. With Rs 4400 crores additional resources from existing mineral production and matching bank finances, poverty can be wiped out from Orissa in 5 years time.
We are confident that you being an economist par excellence will appreciate our view points and take following actions as early as possible:
Amend the provisions of Mines Act & Rules incorporating the provisions mentioned below:
a) Minimum of 50% profit from mining industry must be paid to the State Govt. Auction should be conducted among qualified bidders so that the state gets maximum benefit;
b) An Expert Committee comprising representatives of Government, Mining Industry, and Academia (Mining Geologists/Mining Engineers/Mineral Economists) should decide the cost and profit in a transparent manner as per global market mechanism;
c) Everything being equal among private entrepreneurs and Government PSUs, preference will be given to Central and State PSUs in allotting mining leases;
d) The displaced persons in mine project affected areas should get about 5% of net profit of the Company every year;
e) Excepting for strategic minerals all controls concerning other minerals including coal must vest with the State Govt;
f) Balanced exploitation of mineral resources with long term perspective must be ensured;
g) Ecological preservation must be accorded utmost importance; and
h) Mineral Development Board must be constituted to oversee the above provisions. Experts and Social activists are to be members of the Board.
We sincerely hope that you will incorporate the above provisions in the proposed amendments to the Mining Act to serve the wider interests of the State Governments.
We are presenting this Memorandum in advance through His Excellency the Governor of Orissa. We will submit a signed memorandum by millions of Oriyas to you personally after taking due appointment from your office.
On behalf of the people of Orissa,
Prominent Members of “Mo Samruddha Odisha Abhiyan”
The data is a little dated. The price of Iron Ore has moved another 10% up in 2007 following the 19% in 2006. Per my info and calculation:
International Market price=$84.50
Raising cost = $10
Present Royalty= Rs. 27(or $0.67)
Royalty @ 50% =$36.50
This year's raising = 47.6 million Tonnes
New Total Royalty for GOO at the present level of raising=
$1790 million or $1.8 billion/year which is equal to Rs. 7200 crores/year or approx 8000 crores. So the required 40 thousand crores can be raised with current mining level in only 5 years.