Is Mining Doomed in India?

Mining in India is rife with vested interests and corruption. The Indian citizen is an ignored stakeholder. This exhaustive essay illustrates these problems through the stories of two plants.

In this article we look at  two closed plants from the point of view of the Indian citizen. These are plants where millions of dollars have been invested, but which are closed due to two entirely different reasons.  The first plant is  Anrak Aluminum, a joint-sector FDI project with investment from UAE that has been completed in 2013  in Vishakapatnam, but lying idle. It  has been closed due to non supply of  bauxite  by Andhra Pradesh Mining Development Corporation that has cited opposition to bauxite mining in tribal areas among other reasons. 

The second is the recently closed Vedanta run Sterlite Industries that has been producing Copper in Thootukudi,  Tamilnadu for last 22 years despite several environmental violations and has now doubled its capacity without environmental clearance. It was closed last month after protests against its opening peaked and led to violence. An indiscriminate firing by the police led to loss of 13 lives and consequent closing of the copper smelter  by the Tamil Nadu Government under public pressure.

Some of the richest and a few of the poorest nations of the world are abundant in mineral resources. Mining brings wealth, and with wealth comes conflict. Besides, with the exploitation of resources arrives the exploitation of humans and the environment. Not surprisingly, the nations where environment and civil laws are well defined and strictly adhered to are the ones who manage their natural resources better.

And then there is China. In the last thirty years China broke the dominance of the developed world in mining. It was the outcome of ‘The State High Tech Development Plan’, popularly known as the 863 program, developed under Deng Xioping in 1986. It created a roadmap that made China the world’s largest miner and processor. China also broke into and dominated rare earths that drives the technology world, monopolising over 90% of the rare earth mines and processing.

The Indian citizen is the unheard stakeholder in high stakes mining

Mining is a difficult and resource-intensive profession. The extraction of the ore is often at a lower cost if it is mined from the surface through open-cast mining. But that normally creates immense atmospheric pollution that is difficult and expensive to manage. Sub-surface mining, where horizontal underground  tunneling is done, or shaft mining, where vertical shafts are lowered for extraction, are more capital intensive and need technical expertise to keep it safe and secure.

Mining in India is largely open-cast mining or surface mining, be it coal, iron ore or non-ferrous metals like bauxite, copper, chrome  or nickel. It is also largely in the public sector, which generally follows the principal of low-risk-low-gain mining and processing. One can say that it is  possibly less efficient, but it is also relatively conflict free. Also, with less focus on the bottomline, it is less exploitative.

Humans and the environment both find public-sector mining and processing in India much less taxing and often more friendly than mining in the private sector. But there are exceptions to the rule. Though PSU mining is less competitive than the private sector projects, and more environment friendly, it has its own sets of hazards. One of them is illegal mining and stock pilferage. The lack of accountability has made the mining mafia or illegal miners very active in the mining belts, especially around Government-run mines, be it in Bengal, Jharkhand, Goa, Andhra, Karnataka or Haryana. The illegal mining activity is essentially run by unscrupulous miners or traders who have entered politics or politicians who have entered mining.

So there are essentially three groups of miners in India: The moderately efficient but better-managed public sector following healthy best practices. The competitive but tightly run private sector who are licensed miners, but often violate best practices. And the illegal mining mafia who mine without licence but with political patronage. They loot and scoot in their blocks of influence and are growing fast, especially as licensed mining becomes more challenging.

There are five other stake holders besides the miners. The first is the local population and the indigenous people who live around mines who usually benefit or suffer the most. The second is the Government, be it at the centre or the state, which earns from taxes and royalty. The third is the professional organised social and environmental activists who oppose mining,  especially if it harms the people or nature. The fourth are the rebel groups, including but not limited to Naxal terrorists, who have have their own vested interests, and are illegal but disruptive just like the mining mafia. The fifth is the unheard Indian citizen who legally owns all its mineral wealth but has no voice because the above four stakeholders have cornered the dialogue around mining.

We will here try to bring forth the voice of the fifth stakeholder: the Indian citizen who wants optimum utilisation of the mining assets we own without having to pay a high environment or human cost. Among the questions we ask is why public sectors miners do not increase their capacity utilisation, efficiency and operations as they own most land rights. Why do most private sector miners with the exception of a few cut corners and practice unethical mining that harms the people and the environment? We also ask the central and all the state Governments why they do not try to ensure responsible, legal and efficient mining. Also, what is the accountability of the state and its officers to the citizen?  Importantly,  how is it that the locals or indigenous people are consulted, but the Indian citizens who actually own India’s mineral assets as per the constitution not consulted in mining projects?

Safety concerns must get precedence

In mining industries, after extraction of ore comes the purification process, the benefaction and the smelting and refining, which is once again water- or energy-intensive. It also  causes environmental pollution if the wastes are not managed properly and effluents are allowed to seep into the ground water before treatment and purification. At times, the gasses emitted are hazardous to health.  The third part of the mining is the after-effects of extraction. In what condition is the soil and the air and the water sources of the neighborhood after the extraction? ‘Polluters-must-pay’ is the simple logic. Is the area habitable and restored after mining? Is it worse off or more prosperous than before? Most importantly, is mining and processing safe to the locals? What are the risks, and are we giving  priority to the safety of the citizen?

Though mining creates enormous wealth,  its benefits are generally not felt in its immediate surroundings. Rather it  is said to create both poverty as well as  environmental pollution. Few mining towns across the world are healthy and prosperous. In India we have a solitary example: Jamshedpur is among the rarest of rare mining towns in the world that has remained largely conflict-free, healthy and prosperous. There are many other mining towns in India that have survived but not really prospered.

This is despite the fact that mining is a people-intensive operation, creating  huge opportunities for  employment. The margins in the industry are enough to create wealth for both the investors as well as the locals. But still exploitation and mistrust runs rife in the industry. Part of the reason is due to poor communication between the outsiders who win mining contracts and the locals who believe that they own the area that is being mined.

Part of it is due to the get-rich-quick attitude of the miners and processors. Part of it is due to the local administration which has its own time-bound development goals for the region. They turn a blind eye to environment violations. Part of it is due to external forces who believe that a well-organized industry could upset their vested interests. And a lot of it is due to corruption, which enables industrialists to bypass laws and concerned officials to mint money at the expense of the citizens.

This not only pollutes the environment but also endangers the life of the citizen.  It is here also that the voice of the citizen and his fundamental right to benefit from mining processes is lost. The loss is only due to sharp practices by corporates, and the political activism that counters it in the absence of good governance by the state and the regulators.

The politician and the activist gang up

Aluminium has made modern-day flying possible. It is also used in hundreds of other day-to-day applications from window frames to electric wires from kitchen foils to beer cans. It is considered as the new-age metal that has successfully replaced iron  and copper from core industries. India owns 830 million tonnes of bauxite reserves but its production has been wayward during the last decade. It  dipped from 23 million tonnes in 2007 to 13 million tonnes in 2011 at the height of the Niyamgiri agitation, and has barely recovered to 24.6 million tonnes in the year ended March  2017.

India is unable to expand  bauxite mining from the three states where its reserves are abundant. Bauxite mining has been under the eye of the storm in the state of Chhattisgarh, Odisha and Andhra Pradesh, which have rich high quality ores. These three states have over 500 coal mines, and account for over Rs 60,000 crores of revenue annually. They also have over 300 iron ore mines that account for over Rs 30,000 crores of revenue annually. The total bauxite mining from these three states accounts for less than Rs 500 crore annually, which is almost entirely from Odisha . This despite the fact that two thirds of India’s bauxite reserves are in these 3 states, and in areas where forest cover is sparse.

Way back in 2007, the Odisha Government, replying to a Supreme Court  on the impact of bauxite mining on forest, flora, fauna and tribal population, made it clear that the total forest area involved in bauxite mining as a percentage of total forest area of Koraput and Kalahandi districts was a mere 1.52%. Similarly the controversial Niyamgiri Hills.has no rich forest cover but is really a barren hill top. This because the red soil of bauxite mixed earth, be it in the Kalahandi District of Orissa or the Eastern Ghats in coastal Andhra Pradesh is not conducive to forests. So the dialogue shifted from preserving forests to ensuring the rights and religious sentiments of the Dongria Kondh tribe to stop bauxite mining.

The Forest Rights Act makes mining difficult

 The UPA Government then in power changed the discourse of bauxite mining with a couple of diabolic moves against the interest of the Indian citizen. It was something that helped its vote bank politics and its stated aims of championing tribal rights. Before educating the people about their duties it unleashed the chimera of rights sowing seeds of unrest in an under developed nation. Among the half a dozen rights it introduced during its decade long rule was the Forest Right Acts. It sought to empower the tribal communities and gave them absolute right in decision making for mining projects in areas where they lived.

The design of the Forest Act also meant that no modern industrialization could take place in the tribal areas. It meant that the tribals would have to live on traditional forest produce or doles or charity of the Government or NGOs for the next few generations. It meant that their children would grow up without the benefits of higher education and technology. It meant that they would remain poor and backward people ill-equipped to face the twentieth century world on its own terms. It meant that they would depend on the Government or NGOs for subsistence, and would hence remain loyal as vote banks.

During its decade long rule the UPA also actively encouraged NGOs to proliferate. Over 10,000 NGO’s were active in the bauxite mining belt alone in five states. The anthem of caring  governance in India during the UPA rule was based on Government subsidies and Non-Government charities. It still remains so, despite the change of Government. The NGO business is still thriving in India. Only the political patronage and affiliations have changed. That makes governance difficult. It does not enable a self-sustaining economy. Instead, it puts more and more resources in the hands of the politician for redistribution. A vast number of NGOs connected to politicians also take advantage of the top-down distribution model and live off the economic doles funded by the tax payer.

NGOs pick up the battle against mining

At the turn of the century India had around 100,000 NGOs working for the upliftment of the society. They were largely missionaries or supported by foreign charities and large Indian businesses, and were far away from politics.  Things however changed radically after the UPA came to power. At a Supreme Court hearing, the Government admitted that  30 lakh NGOs were operating in India as of September 2015. India had 1 NGO for every 600 people, which was twice the police force in the nation. Of these, less than 3 lakh furnished accounts of their funding and expenditure to the authorities as mandated under the Societies Registration Act. Only J&K and Mizoram had fully compliant NGOs, while UP, Andhra, Maharashtra and Kerala had most units that were non-compliant. 90% of the NGOs, amounting to 27 lakh organizations, operated without accountability to the tax payer, and most were fly-by-night operators or front companies of politicians.

The  NGOs who were working in the tribal belts actively raised the bogey against mining, and campaigned relentlessly against mining and industrialization during the UPA rule.  In 2012 the Union Minister of Tribal Welfare V Kishore Deo shot off a letter  to the Odisha and Andhra Pradesh governor, seeking a total ban on bauxite mining in these two states. With the NGOs actively tutoring poor uneducated tribals whom they were supporting, all the 12 villages whose opinion the state sought for a court order in 2013 unanimously voted against allowing bauxite mining in Niyamgiri. Bauxite mining became the first casualty of the UPA-NGO nexus, and new bauxite mining projects were dropped like hot potatoes.

But in doing so the Government and the courts overlooked the right of the Indian citizens who are true owners of mineral resources of the nation. Why were they kept out of the discussion? Did it not  violate a fundamental right of  the Indian citizen to mineral resources? It raises a key question that we need to debate. If gold is discovered in my ancestral property, do I or the nation have the right to decide what to do with it? Why should be the law different for an Indian citizen and those benefiting from illegal mining.

Illegal mining is more profitable for politicians

As legal mining leases became difficult during the UPA rule, illegal mining prospered. They were run by the mafia with close connection to local politicians. A new system of mafia mining started during the UPA rule that continues even now. Local goons use manual labour and small earth-moving equipment and trucks by night to remove the bauxite top soil. They are sold to the bigger ringleaders connected to political families in each state, who broker the deals with factories that need bauxite for conversion to aluminium. The system keeps the Indian Government and taxpayer out of the loop, but carries on because of vested interests and a deep rooted nexus between the mafia, local politicians, the police, district administration and the industries that buy illegally mined bauxite at a lower price.

This vested interest of the state-level politicians in illegal bauxite mining has made state governments indifferent to large aluminium projects. Large projects do not give the huge returns to politicians as do illegal mining. Though they could make a fundamental difference to the economy,  8 of the 10 approved projects of bauxite mining in the Eastern Ghats have been stalled citing local and tribal protest. Illegal mining by night continues unabated in those regions with patronage of politicians, police and the state administration.

Andhra Pradesh stalls FDI project citing tribal welfare

Even the state owned APMDC that had signed a contract with an FDI  joint sector project Anark Aluminium approved by the YSR Reddy Congress Government way back in 2007 has reneged on a major contract.  UAE’s Ras Al Khaimah Investment Authority (RAKIA) had invested $44.71 million in a joint sector state of art alumina project. The 1.5 million tonne alumina refinery was completed in 2013 with a total investment of Rs 5600 crore. However it has not been still commissioned.

The state-owned mining development corporation of Andhra Pradesh, which was supposed to deliver 224 million tonnes of bauxite per year, cancelled the contract unilaterally. “The deal is structured in way that it will not benefit tribal people in any manner and is in the interests of the joint venture company,” Chief Minister N. Chandrababu Naidu said while announcing the cancelation of the contract in 2015. The cancellation of the deal has made India look a dicey investment destination and the RAKIA has gone into an arbitration claiming compensation. Why is the Modi Government not taking action and leaving investors at the mercy of the states?

The firing at Thoothukudi shows yet another irresponsible state government

Are mining projects doomed in India ? Why do mining industries have to fight against local people and inflict damages to the environment. and why do activists and protesters have to inflict damages on India’s development initiative? Why do Governments act mindlessly? Or do they act intentionally at the behest of the violators, because they are corrupt?  Why do they take decisions and then go back on agreements? We try to look at the reasons and find solutions on how  to achieve growth without protest or distress.

The Sterlite factory closure in Thoothukudi or erstwhile Tuticorin after a 100-day environmental protest resulted in an unfortunate firing that killed 13 people. The incident highlights the inability of third-world economies  to manage its people and natural resources equitably. There was no reason why people should have died. The police, the district administration and even the courts were aware of the growing strength of protestors, which included the local merchants association, fishermen and affected residents and the influential Tuticorin Chamber of Commerce. So it was not an ultra-left led movement that was ideologically against India’s industrial development.

If there were antisocial elements among the protestors as claimed, they should have been arrested before they created mischief. The State Intelligence had a 100-day feedback window to sort out criminals or stone pelters, if any. It was a systemic failure of governance, a failure of institutions, courts and the local administration to take timely action to stop the protests. It was the failure of the political leadership to deliver sustainable development of natural resources to the people of the state.

The history of the Sterlite plant shows proven violations

The deaths were not a one-off happening. It was a result of a twenty-year conflict between powerful interests who have been time and again clashing over the right to run a copper smelter in a bustling town. Deaths have happened at the plant and its neighborhood before due to gas leakage and acid fume inhalations. The plant has been closed several times for violations during its 22-year chequered history, but got court orders each time to restart operations.

After this closure the spotlight once again shifts to environment violations, safety and the due diligence that needs to be done to operate a 400,000 Tonne-per-annum copper plant.  The doubling of capacity of the 1200 TPD copper smelter without proper due diligence and unconditional clearance from authorities is itself a grave violation. This is not to say  that the expansion project was entirely unauthorized. Yet there were certain key violations that remained to be addressed, and a few of them were unreconcilable. It needlessly violated the right of its citizens to prosper, not perish, due to its natural wealth.

The Thoothukudi incident is the result of a long standing mistrust and simmering dispute between organized industry and  protestors. Vedanta, a London Stock Exchange-based mining company, is in the eye of the storm. It is owned by Anil Agarwal, an NRI who rose from being a scrap dealer to a mining billionaire. Vedanta has interests in non-ferrous metals, essentially bauxite, zinc and copper mining. It has invested in both aluminium and copper industry  in India but has had to face resistance in both mining and processing operations . In the case of the Thoothukudi copper smelter it is an integrated plant consisting of a refinery section, sulphuric acid plant, phosphoric acid plant, converters and continuous cast rod plants.

The plant was set up during the first wave of liberalization under Narasimha Rao, when the Chief Minister of Tamil Nadu Jayalalitha laid the foundation stone of the project in 1994. To be fair to Jayalalitha and Rao, the project would reduce India’s dependence on imported copper and plug the burning hole in India’s foreign exchange reserves, which had hit an all time low just before Rao ushered in the era of liberalization. So though the project was rejected by Maharashtra, Goa and Gujarat, you cannot fault Tamil Nadu, which approved the plant and its location in Tuticorin.

The smelter plant location is the bone of contention

The site selection was however a problem because it was too close to the ecologically sensitive biosphere reserve of the Gulf of Mannar, as well as residential areas of the Thoothukudi city. It was just 14 kilometers of the Gulf of Mannar against the mandated 25 kilometers in the NOC  and 6 kilometers from the city centre. The expansion project that aims to double the current capacity of 1200 TPD is less than half a kilometer from Therku Veerapandiapuram, a suburban locality west of Tuticorin town.

There have been more than half a dozen gas leak incidents during the past decade the latest being on the 23rd March this year. A midnight gas leak caused acute suffocation and led to residents in the area complain to the TN pollution board. As per the TNPCB,  the SO2 levels had exceeded limits between 2AM to 3 AM and a reading of 2939.55 mg/cubic metre was recorded against the prescribed limit of 1250 mg/ cubic metre. It also said that there was a blip on the meter, and the  emission monitor at the plant was not connected to the TNPCB meter for quite some time.

Apart from the occasional gas leaks there has been reports of  effluent leakages from the plant that includes Arsenic and Lead that have affected both the groundwater and the surrounding water bodies. Since the water quality is affected, Sterlite supplies drinking water to the neighboring colonies. But the occasional contamination still pollutes the nearby water bodies, say protestors.

Gas leakages are dangerous to densely populated habitations near chemical plants  and the Union Carbide Bhopal incident is a case that should not be forgotten in a hurry. Unless the location is changed and the plant relocated to a relatively uninhibited area away from human settlements and the ecologically sensitive biosphere there will be continued conflicts and accidents. For this it is the Tamilnadu Government which must take the initiative and offer an alternative, relatively unpopulated site to the plant. It is not easy but a necessary step to minimize the chance of continuous conflict and a future gas disaster.

The violations have been proven time and again and in 2013 the Supreme Court penalized the company Rs 100 crores for environmental violations. The penalty amount was to be deposited with the Collector of Thoothukudi who was supposed to create a corpus that was to be created to help the locals affected by the  pollution. But residents say that the District Administration has not created any mechanism to improve the water, air or soil conditions around the plant or  give relief to the affected citizens.

Mining and smelting by public sector units are less conflict-prone

The public sector copper mining projects and smelting operations have been managed much better. In India, copper mining and smelting is done both in the public sector Hindustan Copper Limited and the private sector Hindalco and Sterlite. HCL is the only fully vertically integrated plant with mining, benefaction, smelting, refinery and casting of copper cathode.  It is a profitably run public sector unit without any major history of violation of environment laws. In case of Sterlite Copper the copper ores are imported, which should make it easier for the investor to meet the required pollution standards. However its record has been extremely indifferent and there is a need of attitude change of the Sterlite Copper management.

Mining and processing  are people-intensive operations creating huge opportunity for  employment and generating goodwill. The margins in the industry are enough to create wealth for both the investors as well as the locals. But still exploitation and mistrust runs rife in the industry. Part of the reason is due to poor communication between the outsiders who manage the projects and the locals who believe that they own the area that is being mined.

There has been a total breakdown of trust between mining companies and the people after the Sterlite Copper fiasco. Part of it is due to the repeated violations and the get-rich-quick attitude of the Vedanta group. Part of it is due to the local administration, which has its own time-bound development goals for the region. They turn a blind eye to environment violations. Part of it is due to external forces who believe that a well-organized industry could upset their vested interests. And a lot of it is due to corruption, which enables industrialists  to bypass laws and concerned officials and politicians to mint money at the expense of the citizens.

Anark Aluminium and Sterlite Copper are two examples of how poorly India has been managing its natural resources. We need to change our attitude to mining if we have to make progress. We have to find responsible investors who give priority to safety and also the environment. We have to bring mining  out of the clutches of the politician and the mafia and the activist. We have to restore the ownership rights of the Indian citizen and act in their interest to ensure ethical mining following best practices.

About the author

Sandip Sen

Sandip Sen is an author and journalist who writes for several national dailies and think tanks. He also appears in TV discussions on economy and environment Apart from journalism, he has thirty years of industry experience. He is the Author of the book 'Neta, Babu and Subsidy : Economic Roundup 2000 to 2014.'