District mineral foundation funds and welfare of the mine-affected communities
- The study has been authored by Rajesh Chadha and Ishita Kapoor is a research analyst at the Centre for Social and Economic Progress.
Mining is an important income-generating activity in India and is a source of employment, income, raw materials for the manufacturing sector, construction, agriculture and energy industries. However, while mining activities benefit the country, the policies and regulations, at times, undermine the local environment, livelihoods and people’s rights. Therefore, under the Mines and Minerals (Development and Regulation) Amendment Act 2015, the Central Government instituted the District Mineral Foundations (DMF) Funds in 2015. The funds collected in the mining-affected districts, managed by non-profit trusts, are to be used for the welfare of the mining-affected population, including the tribal and forest-dwelling communities and recognising them as partners in natural resource-led development and protecting the environment. A separate DMF is created in each district that has mining. The mining companies shall pay DMF 30 per cent of the royalty amount for leases granted before 2015 and 10 per cent for leases granted through the auction mechanism post-2015.
Later in 2015, the Central Government launched the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) to be implemented by the District Mineral Foundations. Under the PMKKKY, the funds would be utilised to minimise the adverse effect of mining on the local environment, health, and socio-economics and ensure long-term sustainable livelihoods for the affected mining communities. Under PMKKKY, 60 per cent of the DMF fund has been allocated to high priority areas such as drinking water supply, environment preservation and pollution control, health care, education, women and child welfare, the welfare of aged and disabled people, skill development and sanitation. The remaining fund can be used for other priority areas like physical infrastructure, irrigation, energy development, and other measures to enhance the mining area’s environmental quality.
Utilisation of District Mineral Foundation Funds
A total of ₹ 53,830 crores has been collected towards the DMF funds between 2015 and September 2021. About 39 per cent ( ₹ 20,766 crores) has been collected from coal and lignite, 50 per cent ( ₹ 27,108 crores) from major minerals other than coal and lignite and the remaining 11 per cent ( ₹ 5,956 crores) from minor minerals. Of the total DMF collection, 91 per cent ( ₹48,989 crores) has been allocated to various projects. Of the allocated amount, only 55 per cent ( ₹ 26,879 crores) has been spent.
The key mining states for which detailed DMF data are available include Andhra Pradesh, Chhattisgarh, Gujarat, Jharkhand, Karnataka, Maharashtra, Odisha, Rajasthan, Tamil Nadu and Telangana. These states make up 88 per cent of the total DMF collection in the country.
Of these, four states – Odisha, Jharkhand, Chhattisgarh and Rajasthan – make up about 66 per cent of the total DMF collection. Odisha has the highest DMF collection at ₹ 14,934 crores but has only spent 50 per cent. On the other hand, Chhattisgarh has collected ₹ 7,651 crores and has spent 68 per cent of the total DMF collection in the state.
While DMF is not tied to a specific scheme or area for work, it is designed to benefit the mining-affected population in the districts. A recent study by the Centre for Social and Economic Progress (CSEP), “District Mineral Foundation Funds: Evaluating the Performance,” has analysed collection, allocation, and expenditure patterns in ten of India’s top mining states through the construction of the DMF Utilisation Index (DMFUI).
The DMFUI analyses the Indian states on quantitative indicators such as the allocation to collection and expenditure to collection ratios and the qualitative indicators like the percentage of DMF allocation towards high-priority areas and the spread across priority areas measured using the coefficient of variation. The states are ranked according to their index scores. Chhattisgarh ranks number one and does consistently better than the other states in all the indicators. The index shows that most states have allocated a major portion to physical infrastructure classified under other priority areas. The paper highlights and suggests focus areas based on the performance of the states. It also discusses the use of DMF funds for combating COVID-19.
Chhattisgarh has performed exceedingly well, allocating almost all and spending two-thirds of its DMF collections. Besides these quantitative measures, Chhattisgarh allocated 62 per cent of its total collections on the PMKKKY high-priority areas. Further, the allocations are relatively evenly spread across high-priority and other priority areas with low coefficients of variation across areas under the two categories.
Measured on a similar yardstick as Chhattisgarh, other states such as Telangana, Gujarat, Karnataka and Odisha have also performed well. However, Tamil Nadu, Maharashtra, Rajasthan, Jharkhand and Andhra Pradesh need to push up efforts for meeting the PMKKKY objectives.
Local Needs and Centre’s Role
While the DMF administration comes under the purview of the districts and states, the new 2021 MMDR amendments have given greater power to the Central Government regarding the composition and utilisation of the funds. The central government has ordered that no sanction or approval of any expenditure out of the DMF fund be done at the state level by state governments or any state-level agency.
While it may not be easy for the Central Government to assess specific local needs, the increased supervision would motivate the districts to spend the DMF funds instead of accumulating these without spending. However, the Central Government must be cautious of the local district-level characteristics. As the DMF fund does not lapse at the end of the financial year, the provisions give a huge scope to plan its use, improve and expand upon what already exists. Currently, the DMF is being treated as any other development or infrastructure fund when it can be utilised for more than that. With the Central Government getting more decision-making power, the DMF fund might get utilised to improve the livelihoods of mining-affected people and regions. Additionally, the Central Government has directed the DMF trust funds to set up a 2-tier administrative committee to ensure effective implementation of the PMKKKY scheme focussed on the affected mining communities.
The Central Government allocated part of the accumulated DMF funds for COVID-19 care in March 2020. The directive issued specified that up to 30 per cent of the funds can be utilised for COVID-19 relief to provide PPE kits, testing equipment and equipment required in ICUs in areas with poorer healthcare facilities. Andhra Pradesh has spent the largest proportion (almost 21 per cent) of its remaining DMF funds on COVID-19. Tamil Nadu, Goa and Gujarat have also spent more than ten per cent of their remaining DMF funds towards COVID-19. However, states such as Chhattisgarh, Jharkhand, Madhya Pradesh, and Rajasthan have spent less than one per cent towards COVID-19.
(Rajesh Chadha is a Senior Fellow and Ishita Kapoor is a Research Analyst at the Centre for Social and Economic Progress. Complete study can be accessed <strong>here</strong>).
(The study has been authored by Rajesh Chadha and Ishita Kapoor is a research analyst at the Centre for Social and Economic Progress.)