The major mineral-rich states in India, such as Chhattisgarh, Jharkhand, and Odisha, have nearly 40 per cent of the population living below the poverty line, much higher than the national average of 21.9 per cent (Planning Commission 2011/12). Affected communities have borne the brunt of large-scale displacement and suffer other negative consequences, such as break-up of the society, health, and economic costs, for which they were never adequately compensated. To address the 'historical hurt' that has been inflicted upon these communities, Sustainable Development Framework (SDF) for mining emphasized the need for 'community engagement, benefit sharing, and contribution to socio-economic development'. Hence, District Mineral Foundations (DMFs) were created under Minerals and Mining Development Regulatory (MMDR) Act, 2015, wherein holders of mining leases are required to contribute to the DMF an amount 'not exceeding one-third of the royalty rates' of the respective minerals, in addition to the royalty paid to the state. Unfortunately, actual implementation saw a huge roll-back on the benefit-sharing provisions, against the lapsed 2011 MMDR Bill that provided for 'an amount equivalent to the royalty paid during the financial year' annually, except for coal and lignite.

To realize the vision and purpose of creating DMFs, the Government of India came out with the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY), to implement the development programmes for the mining-affected areas that takes care of the minimum social and infrastructure needs of the population residing in the mining-affected area. Ministry of Mines 2017 report highlighted that, out of the 12 mineral-rich states, all except Tamil Nadu had framed rules and established DMFs. Till date more than Rs.5,800 crore has been collected under DMFs with Odisha, Jharkhand, and Chhattisgarh having a combined share of 69.5 per cent of the total DMF collection. Although funds have been sanctioned, but utilization rates continue to be abysmally low.

In addition, the allocations at various instances are ad hoc and short-sighted (CSE 2017). In many districts, the DMF plans mechanically list the number and types of works to be undertaken, without any elaboration on the rationale of planning and how these priorities have been decided. It is not clear whether affected people have been consulted or not, or any need assessment was made before sanctioning projects.

Moreover, there are reports of districts allocating a lion's share of DMF towards building physical infrastructure, giving a miss to the basics, such as clean drinking water, nutrition and child development issues, healthcare, livelihood, etc. Also, there are reports of ongoing protest in Odisha where DMF funds are being used for regular projects, for which state would have otherwise provided. In this regard, an assessment needs to be made of how state government expenditure pattern for regular works have changed post the DMFs; whether state governments are sanctioning more mining leases so that DMF could fund their budgetary expenses and its implications for mining-affected communities.

In laying down the guidelines for utilization of funds, although it was articulated that activities meant to be taken up under the 'polluter pays principle' should not be taken up under the PMKKKY but if we look at the funds allocated by DMFs in Chhattisgarh, there is allocation for Environment Preservation & Pollution Control, it is not clear on what projects the funds are being spent upon. If they are projects for which mining companies should be spending money, then there is a major problem.

Mining-dominated areas tend to have lesser population, but since collection in DMF is based on mining activities, the amount would be huge compared to the needs of the population. In this regard, the lapsed MMDR Bill 2011 had provision of the  state mineral fund under which all DMFs would federate and it facilitates inter-district balancing where all the funds were pooled and allocated to districts where needed, thereby maximizing the welfare of mining-affected communities. Unfortunately, MMDR Act 2015 misses out on this.  A cluster-based approach wherein funds could be shared with adjoining districts would be more effective.

Further, since mineral resources are finite, DMF needs to put aside a portion of their annual receipts in the form of an endowment fund so that benefits could be shared with the future generations and for sustaining development in the districts once they ran out of resources.

For the purpose of ensuring transparency and accountability, the lapsed bill of 2011 provided that accounts of the DMF shall be audited in consultation with the Comptroller and Auditor-General of India. The DMF shall also maintain an annual statement of accounts, which shall be made available in the public domain. But the DMF rules of the states fail to acknowledge that without putting in place a transparency mechanism to ensure checks and balances over revenue spending, natural resources cannot be utilized in the best interests of the society.

Majority of the above problems emerge from the governance architect of DMF and flout processes. Governance structure continues to be dominated by bureaucrats with no representation from mining-affected communities, which creates a huge disconnect between what policymakers perceive and the ground realities of what mining-affected communities consider is essential for improving their economic and social condition. A fortnightly or monthly meeting at the block or the village level, drawing representation from all the sections of mining- affected communities would facilitate better utilization and implementation with proper planning, oversight, and accountability.

By far, the policy initiative to link the fiscal space from mining proceeds to the spatial and human development is a positive step to redress the inequalities and for inclusive development process. But for greater realization of vision, the role of community participation in the decision-making process needs to be acknowledged and for that capturing people's perception is instrumental for DMFs to become people centric. Until then, the question still remains whether DMF is an effective instrument for recognizing the right of the local people over natural resources.

Mr Nitish Arora, Research Associate, Centre for Resource Efficiency & Governance, Resource Efficiency & Governance Division, TERI, New Delhi.