Montek opposes GoM's mining profit share plan

Even as the government has finalised its plan to make profit sharing with affected locals mandatory for companies in the coal mining sector as a compensation for area damage and displacement, the Planning Commission, the country’s apex policy advisory body, has expressed discontent over such a scheme.

“Asking business houses to share a part of their profits is not a good idea,” Commission deputy chairman Montek Singh Ahluwalia said. “It is almost like saying that a part of taxation should be privatised. This is not the way.” Ahluwalia was speaking at the fifth Colonel Ajay Mushran Memorial Lecture.

A 10-member Group of Ministers (GoM), headed by finance minister Pranab Mukherjee, last week recommended mandatory sharing of 26 per cent of profits by coal mining companies. For those in the non-coal sector, the panel recommended sharing an amount equal to the royalty paid in the last financial year. This means, for instance, that the country’s largest mining firm, government-owned Coal India, would have to shell out around Rs 2,800 crore every year, while the non-coal sector would share around Rs 4,000 crore as compensation with the local populace.

The GoM’s nod to the controversial proposals, that came in its fourth meeting on July 7, was a part of the benefit sharing regime in the sector sought to be implemented under the amendment to the Mines and Minerals Development and Regulation (MMDR) Bill, 2010.

Ahluwalia, however, was speaking in the context of the muted success the idea of Corporate Social Responsibility (CSR) had achieved in India. While spending on CSR is only voluntary for companies, benefit sharing as a percentage of profits or royalty would be mandatory under the new mining law. “The idea was that the government should do much more in this area in the 11th Plan period. In our analysis, that has remained an area of weakness,” he said.

The memorial lecture was delivered by Reliance Industries Ltd (RIL) chairman Mukesh Ambani who said CSR should not be seen as an exercise in charity. “This narrow definition of CSR springs from western philosophical moods. This increases dependence and reduces enterprise,” Ambani said, adding that CSR needs to become an integral and fundamental part of companies.

Urban development minister Kamal Nath was also present in today’s event. The government plans to introduce the new mining bill in the coming monsoon session of Parliament, after cabinet approval.