Goenchi Mati: Convert a curse to a blessing

Stakes were high; iron ore was in demand; prices soared; mining and corruption became inseparable bedfellows and the mighty roar of trucks overtook the window pane oyster as the ubiquitous symbol of Goan life. Damning reports by the Shah commission, followed by the 2014 Supreme Court judgment exposed a dark web of corruption involving politicians, officials, administrators and mining regulators.

An immediate mining ban was enforced, iron ore dumps to the tune of Rs 15,000 crores were handed over to the state for resale. The exposure of criminal activities brought an opportunity for the state government to recoup losses of at least Rs 65,000 crores from illegal mining.

Goa was given a tabula rasa with regard to mining. The question now is  . . . what principles should be followed when restarting mining?

This is the sixth part of a series.  Read the other parts here

The Future We Need

The Goenchi Mati Movement (GMM) is based on five interconnected principles with common custodianship of mineral resources at the core.  These principles illustrate how through carefully controlled mining activity Goans can be assured of economic security now and in the future. The five principles function in concert. A key feature is the innovative ‘citizen’s dividend’ or ‘universal basic income’, earned from the investment of mineral receipts.

 The first two principles are supported by the Public Trust Doctrine and the Intergenerational Equity Principle from the Indian Constitution:

  • Minerals are part of the commons and the state is merely a trustee with a mandate to act on behalf of the people.
  • We observe Intergenerational Equity: Minerals are inherited assets. We must either pass these on to future generations intact, or exchange them for other assets: always ensuring that the value remains undiluted

 In order to benefit from our mineral assets while simultaneously protecting the value, GMM advocate that we:

  • Ensure Zero Loss mining: making sure the full value of the mineral (minus the cost of extraction) is received.
  • Create a Permanent Fund: whereby the money resulting from the mineral sales can be deposited in an asset of equal value.
  • Pay a commons or Citizen’s Dividend: distribute equally the Permanent Fund income (after inflation) to all Goans.

 

What are the Commons and Intergenerational Equity?

The Public Trust Doctrine, is an integral part of common law derived from Article 21 (Right to Life) of the Constitution. In the Cidade Goa case, the Supreme Court held

“natural resources including forests, water bodies, rivers, sea shores, etc. are held by the State as a trustee on behalf of the people and especially the future generations.”

Natural resources, including minerals, are a part of the commons, equally owned by all: present and future. Under the Indian Constitution (along with the Portuguese Colonial Mining Laws, 1906), sub-soil minerals in Goa are the property of the state, not that of the central government or the owner of the surface rights. The state is merely our trustee.

The Intergenerational Equity Principle is also held to be integral to the Right to Life. In essence, future generations must inherit at least the same level of resources that we did. “We don’t inherit the planet from our ancestors, we borrow it from our children”. Indian inheritance laws likewise designate the present generation as custodians of commonly-owned resources on behalf of future generations.

With this standard in place, citizens have a right and a duty to ensure that Goan mineral resources are protected and correctly administered by our elected representatives as trustees of the people and especially future generations.

 

What is zero loss mining?

Zero Loss mining is quite simply the requirement that when the government is selling our minerals, it must ensure it does not suffer a loss, as any such loss is a per-head tax on the citizens, and a permanent loss to our children and future generation – an intergenerational theft.

If we examine the eight-year period between 20014 and 2012 the Goa government failed miserably in discharging its duty as a Public Trustee. It captured only a small fraction of the large-scale mineral depletion (5%) and turned a blind eye to the plethora of malpractices listed by the 2014 Supreme Court.

 

2004-2012 summary of Goa Government mineral receipts:

Total Goa Government declared revenues Rs. 27,402 crores

Value of mineral resources extracted Rs. 53,833 crores (appropriated by the mining leaseholders)

State mineral receipts Rs. 2,387 crores (4%)

 

The Resource Curse versus zero loss mining

A study by the World Bank found countries that are more dependent on minerals underinvested in savings.  Resource rich countries used up their natural resources to finance their lifestyles without investing in productive assets. Had the money from mining been saved, Nigeria would be five times as wealthy as it is. Gabon, Trinidad and Tobago, and Venezuela would each have per capita assets equivalent to South Korea.

This phenomenon is labelled the Resource Curse. “Blood diamonds” and “conflict minerals” are terms often used. The boom in natural resources frequently leads to civil conflict, theft, large-scale corruption and stunted economic growth. In terms of Goa mining has negative implications for tourism, the highest earner in the state, and in turn property. The brightest and best of young Goans are tempted to sell up and leave what is rapidly becoming an unrecognizable landscape torn apart by pollution decimation of the forests. Savage cuts made by rogue mining into the bedrock of our physical and cultural soil.

 

Can investing in a Permanent Fund prevent the Resource Curse?

Traditionally, inheritances were invested in precious metals, precious stones or land – assets that maintained value over many generations. In modern times, countries invest in Permanent Funds. These are endowment funds with three conditions: (a) the principal is never touched; (b) the income earned is reinvested to the extent of inflation, ensuring that it does not lose value; and (c) income beyond inflation can be distributed. Permanent Funds are invested to generate maximum returns, and are usually outside the nation. Clearly, since the minerals were part of the commons, the permanent fund would also be part of the commons – the state is merely the trustee.

 GMM argues that only saving 100% of the money from mining in the Permanent Fund will avoid the Resource Curse. There are a few reasons why a Permanent Fund is a better investment than infrastructure, education or health investment. Firstly, it stops easy money flowing to the government and makes it less accountable and transparent to the people than direct taxation. Secondly, it reduces the incentive to convert minerals at the wrong time. Thirdly, government investments are notoriously inefficient and suffer from cronyism, such as can be witnessed with PWD projects. Fourth, all infrastructure has a lifespan.  Health and education are assets for individuals, but with a limited overall socioeconomic return. Last, world experience shows any division with a part going to the government will rapidly be exploited by politicians (emergency) to cut off the Permanent Fund. It is much easier than raising taxes.

 

Goenchi Mati Permanent Fund

The Supreme Court endorsed the creation of the first ever Indian Permanent Fund: ‘Goa Iron Ore Permanent Fund’. This fund initiated by Goa Foundation is central to GMM’s proposal. It is currently designated to receive:

  • 10% of amounts from e-auction
  • Additional levy of 10% of sale value of iron ore

 

The Goa Iron Ore Permanent Fund goes part way towards the solution. Currently the fund holds Rs. 94 crores. Amounts due from illegal mining, as well as illegalities in mining, can be deposited into the Permanent Fund in line with the SC ruling.

 

Permanent Funds have a long history internationally operating in countries such as Norway, Botswana, Alaska, Chile.

 

‘The test of the implementation of the Public Trusteeship principle is the Capture Rate. An explicit target of a Capture Rate of 90%, from the current 4%, would provide a meaningful goal for the State to achieve’.- Dr Claude Alvares, Director. The Goa Foundation

 

Professional asset management is essential to its success. The fund must be protected against any mortgage or liens and afforded the highest levels of scrutiny, security and multi-tiered auditing so as to avoid being compromised. GMM proposes that the fund be invested through the National Pension Scheme. They also propose that the fund be protected from the politicians by inclusion into Article 371 of the Constitution (Special Status)

 

What is the Citizens’s Dividend?

Investing money in a permanent fund means that the capital remains untouched and generates income. The real income (after reinvesting for inflation) can be distributed as a commons dividend, equally to all and as a right of ownership to the true owners, the people.

The Citizen’s Dividend plays a critical role in the GMM five-point solution, which is designed to reinforce the bond between the citizens and their mineral commons thus encouraging closer scrutiny of the money:

  1. People are linked directly to their minerals through the Citizen’s Dividend. They will take responsibility to monitor mining closely as they are directly impacted.
  2. Good governance follows when politicians are forced justify levying taxes.
  3. Corruption is reduced because of keen public monitoring, the requirement for zero loss mining and the full value to be saved in the Permanent Fund.
  4. The need to mine is reduced as the government isn’t benefitting from mining – only citizens are beneficiaries
  5. Damage to the environment and human rights issues benefit. Material gains no longer motivate illegal activity
  6. Mining is only done when most profitable thus reducing overall mining/ mineral consumption

 

The citizens’ dividend would help support the jobless mining dependents and the mining affected. This in addition to infrastructural road and mining restoration projects financed in part from funds recovered from illegal mining.

‘If implemented well, this (Permanent Fund) will dramatically reduce the environmental burden on the state, it will provide a cushion of income for the state, and it will ensure productive employment and better prospects for those living in the mining belt’ – Dr Claude Alvares, Director. The Goa Foundation

 

GMM principles as the default

GMM argues that their principles are in consonance with the Constitution, our religions and customs as well as economics. It ensures that the commons remains the commons, and that the income from the commons is distributed only to the commoners. It is fair, right, just, ethical and moral. This should be the default, and deviations must be justified.

 

What did the government do?

After the Supreme Court judgement, the state was handed a Permanent Fund, Rs. 65,000 crores recoverable, Rs. 4.5 lakhs a person, due to illegal mining and a clean slate for a modern mining system. Did they come down hard on corruption and recover Rs. 4.5 lakhs a person? Did they achieve Zero Loss mining? Were mining leases auctioned as promised in the election manifesto? Did the losses to our children stop? Can we look them in the eye and tell them, we have started doing our duty, protecting your inheritance?

This is the sixth part of a series.  Read the other parts here

 

By Sarah Dynah McGinnis

 

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