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| Govt proposes to make land-losers stakeholders |
| Press Trust Of India / New Delhi Apr 15, 2010, 00:03 IST |
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The government is considering a proposal to make it mandatory for companies like Vedanta Resources and ArcelorMittal to offer shares to those displaced by their future mining projects. But the move is being opposed by the industry.
Mining body, the Federation of Indian Mineral Industry (Fimi), described the proposal as a “death knell” for the sector, as it would cut into profits by escalating the cost of mining.
In the proposal, which is part of the draft Mines and Minerals Development and Regulation (MMDR) Act, the mines ministry has sought shareholding for land-losers in new mining projects of the companies.
“The proposal says a company getting a new mining lease will have to offer shares equivalent to 26 per cent of the company for free, through the promoter’s quota, to people losing land,” a senior mines ministry official said.
The company, which will allot shares to the land-losers, would be a subsidiary of the parent company undertaking the mining project.
In case the mining lease was in the name of the parent company or the mining right has been granted to an individual, it had been proposed that the companies share 26 per cent of the annual profit from the mining project with the landowners for 30 years, he said.
The proposal gives land losers the option to either go for free shares in a company or share annual profits, the official said.
Besides giving shares, there was also a separate proposal to offer jobs to the displaced in the mining project, he said.
Industry body Fimi said: “The proposal is a death-knell for the mining industry. Allotment of 26 per cent share or 26 per cent of profit after tax and employment and other assistance will be beyond the capacity of any entrepreneur in a volatile mineral and metals market.
“There will be a chaotic scene, leading to more illegal mining. Further, CSR should be voluntary and not forced through law. Compensation should only be considered where there is a physical irreparable damage to some portion of the land generating revenue such as agricultural land .What has been proposed is mind-boggling.”
Fimi Secretary General said, "The (draft) MMDR Act (31 March, 2010 version) has therefore turned out to be bad both economically as well as fiscally. There is no incentive for investment in mining, which is risky and capital-intensive.”
However, industry experts feel such a move to compensate land-losers would expedite the process of land acquisition, which has delayed the proposed projects of global companies like ArcelorMittal, Posco and Vedanta Resources in India.
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