A first step

Moving towards sustainable iron ore mining

The ban on iron ore mining in Karnataka and Goa imposed by the Supreme Court in 2010 led to polarised opinions about its consequences. The economic impacts were, undoubtedly, negative. Iron ore exports fell off sharply, contributing to the subsequent burgeoning of the current account deficit. A country that has amongst the largest reserves of the mineral found itself importing it. Moving to the microeconomic situation, the ban resulted in both workers and equipment being forced into idleness, with the inevitable consequences for household incomes and equipment owners and those who financed them. However, on the other side of the divide, the ban was a fitting and inevitable response to the brazen disregard for any environmental regulations by the miners. In their zeal to take advantage of a price boom, they seemed to go to any lengths to extract the ore and ship it off to the highest bidder, mostly Chinese steel makers. How could the judiciary look the other way in this situation?

In effect, the pendulum swung from one extreme to the other; from unsustainable exploitation to a full stop. Neither does the public interest any good. The real question is whether there is a feasible middle ground, which combines commercially viable mining with environmental conservation. There are unique governance and political economy challenges that require a solution rooted in the Indian context. It is against this backdrop that the proposal to set up a Section 25 company - not-for-profit - by the Karnataka government needs to be viewed. This is an arrangement whereby this company will take on the responsibility of dealing quickly and effectively with the environmental consequences of mining, which cannot be avoided. So, tasks like afforestation, which require preparing the land and then planting and maintaining trees, will be taken on by this organisation. It will be funded by revenue from mining leases as well as sale proceeds from existing stock. This entity expects to spend Rs 30,000 crore over the next 30 years, concentrating on the districts of Bellary, Chitradurga and Tumkur. It will be governed by a board comprising representatives of a whole range of government stakeholders as well as people from the mining sector.

This approach represents a promising beginning to a problem of serious dimensions. If it succeeds, it will serve as a role model for sustainable mining operations throughout the country. So all stakeholders have a huge interest in making it work. In order to increase the chances of success, a number of things will need to be done. One, it is reported that this entity will get involved in a whole host of social welfare programmes. This is a mistake. It should remain focused on sustainability. Two, the governance model is appealing in theory, but it carries a significant risk of gridlock in practice. Effective closure rules on key decisions need to be put in place to avoid the endless wrangling typical of such mechanisms. Three, civil society must have a formal and explicit role to play in governance, with appropriate boundaries. Failure is not an option.