Mines not profitable? Locals to get compensation

The Mines Ministry is planning to make it mandatory for companies to compensate people for their land with the amount of royalty they pay to states, even if the mines are non-functional or running losses.

As per the proposed legislation, miners will have to share 26 per cent profits of their projects with those whose land is acquired.

However, to further safeguard the interest of the displaced, the government is now trying to ensure that they get returns in case mines make losses or are not operational. "The Mines Ministry has proposed that the displaced be compensated, with amount equivalent to the annual royalty paid by the miners to state governments, even if the projects are non-operational or making losses," a senior government official told PTI.

"This will be in addition to the proposed clause that makes it mandatory for firms to share profits and give symbolic free equity (one share)to affected persons," he said.

The royalty paid by mining companies to state governments like Orissa, Jharkhand and Karnataka runs into crores of rupees. Royalty on most of the minerals like iron ore is collected on the basis of its market price.

Many companies take years to develop and start production from the mines from the date of allocation of blocks. Last week, a Group of Minister (GoM) headed by Finance Minister Pranab Mukherjee had asked the government to rework the draft mining legislation and give it "more teeth".

It had asked the Mines Ministry to make it mandatory for mining ventures to share 26 per cent of their profit from mines with locals, under the new mining Act being framed.

"The proposal to compensate the displaced has already been vetted by Ministry of Corporate Affairs, which suggested profit sharing instead of the earlier proposed 26 per cent equity in the ventures," the official said.

The equity sharing provision was opposed fiercely by the industry, especially lobby group FICCI. The Mines Ministry is expected to send the revised draft of the bill to the GoM this week.

"The GoM may meet once again next week, before the Bill is sent to Cabinet for its approval", said the official. Mines Secretary Subramanyam Vijay Kumar had said, "It would be our priority to introduce the Bill in the current session of Parliament."

The new Bill seeks to expedite grant of mineral concessions in an expeditious and transparent manner, besides attracting investments in the sector. Investment worth lakhs of crores of rupees has been delayed because of land owners' resistance to part with their assets.