The District Mineral Foundation (“DMF”) was first mooted in the famous Samata judgement. The Mineral Foundation of Goa provided a template for all India. A DMF was proposed in the MMDR Amendment Bill 2011. The bill was never passed. After the 2014 elections, the MMDR Act was amended by ordinance and then by Parliament. This amendment brought the District Mineral Foundation into law.
The Supreme Court ruled in the famous Samata judgement in 1997 that in certain tribal areas (Schedule V of the Constitution), mining should be done with benefit sharing with the local inhabitants. It provided for cooperative mining by tribals, and that 20% of profits should be set aside for local area development.
TERI (The Energy & Resources Institute) had studied the impact of iron ore mining in Goa in the late 1990s, and had recommended the formation of the Mineral Foundation of Goa to deal with the various impacts of mining and to enable a “social licence” for mining. In 1997, as a part of the famous “Areawide Environmental Quality Management (AEQM) Plan for the Mining Belt of Goa“, TERI proposed a mineral foundation. TERI further developed a frame work for a minerals foundation for Goa Mineral Ore Exporters Association (“GMOEA“). The Mineral Foundation of Goa was set up on 12-Dec-2000 and has been active in the mining belt of Goa. Since then, amongst other activities, it has created assets of Rs. 24 crores.
The National Mineral Policy 2008 recommends the creation of a Sustainability Development Framework for mining (“SDF”). The Ministry commissioned ERM India Pvt Ltd to develop the SDF. In parallel, the draft MMDR Amendment Bill 2011 was opened for discussion. It provided for 26% of the net profit of mining be deposited into a District Mineral Foundation. The final SDF approved by the Ministry of Mines made extensive reference to the provisions of the draft MMDR Amendment Bill 2011. However, the bill lapsed.
MMDR Amendment 2015
The Mines & Minerals (Development & Regulation) Act 1957 (“MMDR Act”) was amended by the MMDR Amendment Ordinance 2015, promulgated on 12th Jan 2015. The MMDR Amendment Act 2015 replaced the ordinance and was notified on 27th March, 2015. These provided for
“9B. (1) In any district affected by mining related operations, the State Government shall, by notification, establish a trust, as a non-profit body, to be called the District Mineral Foundation.
(2) The object of the District Mineral Foundation shall be to work for the interest and benefit of persons, and areas affected by mining related operations in such manner as may be prescribed by the State Government.
(3) The composition and functions of the District Mineral Foundation shall be such as may be prescribed by the State Government.
(4) The State Government while making rules under sub-sections (2) and (3) shall be guided by the provisions contained in article 244 read with Fifth and Sixth Schedules to the Constitution relating to administration of the Scheduled Areas and Tribal Areas and the Provisions of the Panchayats (Extension to the Scheduled Areas) Act, 1996 and the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006.
(5) The holder of a mining lease or a prospecting licence-cum-mining lease granted on or after the date of commencement of the Mines and Minerals (Development and Regulation) Amendment Act, 2015, shall, in addition to the royalty, pay to the District Mineral Foundation of the district in which the mining operations are carried on, an amount which is equivalent to such percentage of the royalty paid in terms of the Second Schedule, not exceeding one-third of such royalty, as may be prescribed by the Central Government.
(6) The holder of a mining lease granted before the date of commencement of the Mines and Minerals (Development and Regulation) Amendment Act, 2015, shall, in addition to the royalty, pay to the District Mineral Foundation of the district in which the mining operations are carried on, an amount not exceeding the royalty paid in terms of the Second Schedule in such manner and subject to the categorisation of the mining leases and the amounts payable by the various categories of lease holders, as may be prescribed by the Central Government.”
Rules and regulations of the DMF
The Union Ministry of Mines issued the Model District Mineral Foundation Trust Deed on 7th July 2015. This is not mandatory for states to implement. The Union Ministry of Mines then notified on 16-Sep-2015 the Pradhan Mantri Khanij Kshetra Kalyan Yojana (“PMKKKY”, loosely translated as “prime ministers’ development scheme for mining affected areas”). The PMKKKY is mandatory for states to follow. The PMKKKY divides the inflows into two broad categories. At least 60% of the funds must be spent on “High Priority Areas”, which are drinking water supply, environment preservation and pollution control measures, health care, education, welfare of women and children, welfare of aged and disabled persons, skill development and sanitation. The other areas where spending is permitted are physical infrastructure, irrigation, energy and watershed development and any other measures for enhancing environmental quality in mining district.
The rates for contribution to the DMF were notified the following day, 17-Sep-2015, as the Mines & Minerals (Contribution to District Mineral Foundation) Rules, 2015. Essentially, for old leases, it is 30% of royalty. For new leases by auction (after 12-Jan-2015), the DMF contribution was 10% of royalty. It should be remarked that since the DMF contribution is payable from 12th Jan 2015, and the actual rates were notified 8 months later, it has given rise to a lot of litigation.
Goa’s District Mineral Foundations
The Goa government first notified the formation of the North Goa and South Goa DMFs on 5-May-2015. The Directorate of Mines & Geology, Goa Government (DMGGoa) next uploaded draft DMF rules on its website on 11th January 2016. The final Goa District Mineral Foundation Rules, 2016 were notified on 15th January 2016. Unfortunately, the DMF rules clearly violate the PMKKKY parameters. This is clearly set out by Center for Science and Environment (CSE). Goa Foundation has also pointed this out in its letter to the Goa Government, and has recommended that the Goa government adopt the CSE approach and even the CSE drafted Model District Mineral Foundation (Trust) Rules.
Assuming the iron ore price to be Rs. 2,000 a ton, a 20 million ton cap for Goa, and royalty rates of 15% on iron ore, the total amount available to Goa’s two DMFs would be Rs. 180 crores (US$ 30 million) annually. This is much larger than the budget of the Mineral Foundation of Goa. Spent well, it can positively impact the mining dependent significantly. However, the Goa Government’s DMF rules make it effectively a giant slush fund.