Business Today

None the Wiser

Yet another mining scandal. Obviously, states didn't learn their lessons from the Centre's coal mining scam.
twitter-logo Anilesh S Mahajan        Print Edition: November 22, 2015
Rajasthan CM Vasundhara Raje
Rajasthan CM Vasundhara Raje (Photo: Chandradeep Kumar)

On October 18, Rajasthan's Chief Minister Vasundhara Raje surprised everyone by cancelling 601 mining licenses in the state. She also had an order issued by Governor Kalyan Singh for a Lokayukta inquiry into the entire allotment procedure, identifying irregularities and fixing responsibility of the officials. Earlier, she had already scrapped 137 other mining licences because they were issued after the January 12 deadline.

Embarrassed with another set of corruption allegations, Raje will have to move faster in ushering mining reforms if she would like to be seen above board. She stirred her bureaucracy to look for ways to bring in e-auction on the lines of the coal block allocation by the coal ministry in Delhi, evolving a transparent policy and procedure to allocate mines. But before that, she also needs to bring in her own set of land reforms, with the Centre withdrawing the land acquisition bill. These reforms must ensure a transparent and competitive process for discovering the price of minerals. This means that she needs data repository determining the geological complexity of her state and that too quickly.

Rajasthan CM Vasundhara Raje has been accused of causing a Rs 45,000-crore loss to the exchequer by allocating mines on 'first-come-first-served' basis

Rajasthan has 79 known varieties of minerals, of which 57 are being commercially exploited, which contribute nine per cent to the country's mineral production. The new policy allows 100 per cent FDI in mining, but the industry doesn't see these mines as lucrative. This is largely because the size of the blocks is small. The size of the mining area cancelled was only five sq. km and the big players see a brighter opportunity if the block size is minimum 50 sq. km. The big miners say that given the scale of their operations, in terms of the equipment and the technology they bring in, business is feasible only if the size of the block is bigger. The state has not taken any decision on this yet.

Rajasthan is a large producer of minerals such as lead, zinc, gypsum, soapstone, ball clay, calcite, rock phosphate, feldspar, kaolin, copper, jasper and silver, among others. Some big commodity players, including Vedanta Resources, Ultratech and Ambuja Cements, have shown interest in mining operations in the state. Raje's government will also have to take decision on whether to allow value addition and setting up mineral based industries by the miners. The state is seeking investments from the global as well as domestic commodity giants but the Rajasthan government needs to put its house in order before asking them to explore minerals in the state.

Politically, Raje needs to make her administration more transparent. The opposition has already accused Raje of causing a Rs 45,000-crore loss to the exchequer by allocating mines on "first-come-first-served" basis. The state government should have auctioned the mines, say Raje's political opponents. Over the years, Rajasthan followed a "first-come-first-served" policy to dole out these licenses, but charges of impropriety have dogged the present and past dispensations. A PIL was filed on May 30 at the Rajasthan High Court seeking cancellation of the 653 mine licences issued after October 30, 2014. It is still pending.

Raje was under pressure after the arrest of principal secretary (mines), Ashok Singhvi, in September. Singhvi was heading the mining department, and apparently gave these licenses between November 2014 and January 2015 in a "superfast mode". There were allegations that he circumvented several rules and procedures to benefit a chosen few. The various applications for mining licenses were pending for up to six years, but were cleared in 80 days. Around the same time, the BJP-led government in Delhi was trying to push through amendments in the Mines and Mineral Act to introduce auctions.

The Rajasthan government too has been pushing for reforms over the last two years and managed to change several rules, policies and laws governing mines and labour. But, with Singhvi facing investigation, the CM is in a tight spot. Auction is the new rule, after the Modi government managed to amend the laws.

Most miners impacted by the cancellation of the licenses are small-time operators. These mining areas measured less than five sq km. The Rajasthan government says that nothing much had moved on the ground, so it was much safer to scrap these licenses and start with a clean slate.

The Centre's new law sets high standards and the Rajasthan government needs to have a similar policy. Rajasthan can frame its own policy and rules, but will have to follow the spirit of the Centre's law. Raje faces a tall order, not only to discover the price of minerals effectively, but also to clean up the system.

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