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| T N Ninan: Auction mining rights |
| T N Ninan / New Delhi Jul 11, 2009, 00:58 IST |
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There is no other way to stop corruption.
A Marxist-Leninist website has the following information: The 145 million tonnes of iron ore that was extracted in India last year fetched Rs 3,000/tonne in the market. It cost Rs 300 to mine, and another Rs 300 or less was paid as royalty to the government. The balance was profit for the mining company. The numbers may or may not be correct, but the website goes on to look at profit trends in companies like Tata Steel and Sesa Goa, and the resulting valuations for the latter, which changed hands not long ago. Among the questions that the website asks is whether the ore belongs to the local people, the state government, the central government, or the mining company. It is easy to see from this how the alienation of large numbers of people (usually marginalised tribal populations in forested areas) because of mining controversies can have fuelled the Maoist insurgency across the country’s heartland.
Cut to an industry body said to represent mining interests, which has come out in opposition to the policy of auctioning mining rights. This seems quixotic, when the mining of oil and gas fields has been accepted policy the world over. The ground rules under which contracts are signed are well established, and there is no reason why prospecting for coal or bauxite should be not be dealt with in the same way, and why proven reserves should not be auctioned to the highest bidder. This is especially the case when it is well known that the granting of mining rights has been a grey area, with companies lobbying furiously to get rights to one or other block. While it is next to impossible to verify such claims, it is said that at least one minister in the last government was handing out mining rights on the basis of a fixed kickback rate per million tonnes of ore being given. It is precisely this kind of corruption that an open auction is designed to prevent, and it is surprising that an industry body should be opposing it.
As it happens, the government decided more than a year ago that auctions are the right way to go—a stance that China too has taken. The policy adopted in March 2008 said that mining leases would be auctioned to actual users and that exports would be encouraged in value-added form (in other words, the country should export steel, not iron ore). It is not clear that the legislative changes required to give effect to this policy have been carried out; even if they have not, that is only a procedural hurdle.
The states that have the largest mineral deposits are not happy with the auction policy, because they would like businessmen to set up industrial units in the states that have the ore. While this view is understandable, it does not make economic sense. Industries use different inputs and often different minerals in the same industrial process. Transport linkages (including ports) are important in determining location, as is the simple but often complicated question of the availability of land. A businessman should have the freedom to locate his industrial unit where he finds it most convenient; that a mineral comes from a particular state should not be relevant, especially if the state gets an appropriate cess or royalty on the minerals mined within its borders. That cess or royalty, bid in open auction, can and perhaps should be used substantially for the benefit of the people in the area being mined, especially when they are poor and marginalised.
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