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The Karnataka government has proposed setting up a special purpose vehicle (SPV) to improve the environment of districts ravaged by mining. The SPV will formulate and implement projects under the Comprehensive Environment Plan for Mining Impact Zone (CEPMIZ) and will be known as the Karnataka Mineral Rich Region Development Corporation (KMRRDC).
The decision follows a directive of the Supreme Court. Based on a report submitted by the Central Empowered Committee that looked into the impacts of indiscriminate and illegal iron ore mining on Bellary, Chitradurga and Tumkur districts in the state, the apex court, on Novemeber 2, 2012, had asked the state government to form an SPV.
The CEC, in its report submitted to the apex court on October 11, 2012, had recommended formation of an SPV for the implementation of a Rs 30,000 crore comprehensive environment plan, funded by mining companies over 30 years, in districts affected by mining.
The panel’s recommendation was that the SPV will implement afforestation and a whole series of programmes in the health, nutrition, water supply, employment, soil conservation, biodiversity conservation and minor irrigation sectors, “ for ensuring inclusive growth of the area surrounding the mining leases” in the three districts.
The Karnataka Lokayukta report in 2011 had estimated that around 30 million tonnes of iron ore was illegally exported between 2006 and 2011. The value of illegally exported iron ore was estimated at Rs12,228 crore.
A recent audit report for 2011-12, published by the Comptroller and Auditor General (CAG) of India, had revealed that Karnataka has incurred a revenue loss of Rs 2,976.26 crore between 2005 and 2011 due to illegal extraction and transportation of minerals.
The CAG report has also revealed increasing incidence of diseases like tuberculosis (TB) and other respiratory disorders among local communities in Bellary district. Mining has also adversely impacted livestock population and area under cultivation and irrigation.
Funding mechanism
The CEC has suggested that the comprehensive environmental plan which is to be implemented through the SPV should be funded in the first year from sale of existing stock of iron ore lying with mining lease holders, stockyards, steel mills, and also from the fines levied for illegal mining. But over the long term, much of the money for the SPV will come from 10 per cent of the revenue from sale of freshly mined ore, and the allotment of cancelled leases through a transparent process linked to the market value of metals.
CEC calculations estimate that over the first five years, nearly Rs 9,347 crore will be transferred to the SPV from sale of ore and auction of cancelled leases. Once mining operations resume, CEC estimates the SPV will get Rs 2,200 crore over the following five years and Rs12,500 crore over the subsequent 25 years.
The Supreme Court has ordered levy of three kinds of fines from those who are engaged in illegal mining. The first is for encroachment of land. A total of 101.70 hectares (ha) has been mined outside the sanctioned lease area, while 128.39 hectares has been encroached for dumping ore. Another 300 ha has been encroached upon for other purposes. The fine will be Rs 5 crore per ha for mining outside the approved lease area and an additional Rs 1 crore per ha for over-dumping, construction of illegal roads and other such violations.
The second category of fine involves money that miners have to deposit for the implementation of resettlement and rehabilitation (R&R) programmes in the lease areas. Companies that have mining leases for less than 50 ha will have to spend between Rs 1 crore and Rs 5 crore on R&R. The larger mines will have to spend Rs 10-12 crore. The third fine is for illegal extraction of ore. The fine in this category would be around Rs 10,000 crore.
The SPV will be formed under Section 25 of the Companies Act, which governs the constitution of not-for-profit firms. The state chief secretary will be the chairperson of the SPV.