A missed opportunity for social justice in mining regions

This article appeared in Financial Express

Urgent reforms required to make District Mineral Foundations an instrument for social justice.

The District Mineral Foundation (DMF) was conceived as a transformative institution to ensure those who bear the brunt of mining activities also share its benefits. Set up in March 2015 under the Mines and Minerals (Development and Regulation) Act, the DMF is designed to channel mining revenues to improve the lives and livelihoods of affected communities. However, a detailed assessment of 23 states and key DMF districts by me and my colleagues paints a concerning picture.

While DMFs have collected over Rs 1.03 lakh crore, only about 40% has been utilised. Worse, much of this spending has been directed towards capital-intensive projects — roads, bridges, buildings, parking lots, and water pipelines — that should ideally be funded by state and central government budgets. The projects that matter most to mining-affected communities — livelihoods, skills, education, health, and support for small businesses — have received minimal investments.

With India’s continued economic growth and increasing mineral demand for the energy transition and net-zero goals, this fund will continue to expand. Our projections indicate Rs 2.5-3 lakh crore could be collected over the next 10 years. If this money is utilised prudently, it can transform the lives of millions of India’s poorest people. We must therefore ask: Will the DMF be yet another noble initiative that failed to deliver, or will it evolve into a truly participatory and people-centric institution?

Intent vs reality

DMFs came into being after decade-long discussions on the issue of “resource curse”. The fact that India’s richest mining districts are inhabited by some of its poorest people prompted the government to set up the DMF as a non-profit trust. Mining firms are required to contribute an amount equal to 10-30% of the royalty to DMFs for investments to improve the lives of affected people. In September 2015, the government launched the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) to guide DMFs on planning, prioritising, and utilising the funds.

DMFs are present in 645 districts, but the funds are largely concentrated in 50. In fact, the top 21 districts, which have each collected at least Rs 1,000 crore, account for nearly two-thirds of the total DMF accruals. These districts are largely tribal-dominated with high multi-dimensional poverty.

Our assessment shows that the biggest challenge with DMF implementation is governance. DMFs in all districts essentially function as extensions of the district collectorate, with district collectors/magistrates chairing both the governing council (GC) and managing committee (MC), undermining the accountability of the institution. The GC and MC are also dominated by officials, MPs, and state legislators, with minimal representation of the affected communities despite legal provisions for their participation. Worse still, none of the districts have identified mining-affected people, making it easier for DMF projects to be dictated by district administrations rather than community needs.

Investment planning is also unstructured in most districts. While annual and perspective planning is mandated under the PMKKKY, no DMF has developed a structured annual plan or published a five-year perspective plan. Most projects are approved in an ad-hoc manner without thorough need assessments involving gram sabhas, another legal infringement.

The failure of the institution has translated into the misallocation of funds. As mentioned above, infrastructure projects have received the largest share of DMF spending, locking the districts into expensive servicing and maintenance.

Consider Jharkhand, where over 40% of the funds have been allocated to large piped drinking water projects. But these projects are plagued by delays and operational inefficiencies, with little investment in decentralised water management solutions that could sustainably serve affected communities. Similarly, in Chhattisgarh, a significant portion of education funds has been spent on building schools and hostels, but without corresponding investments in teachers, learning material, or digital education infrastructure.

The lack of investment in human capital is particularly concerning. Our analysis shows that less than 5% of DMF funds have been spent on employment generation initiatives. In mining districts like Dhanbad and Kendujhar, where thousands of workers have lost livelihoods due to mechanisation and mine closures, DMFs have failed to provide meaningful alternatives.

Need for urgent reform

Despite the shortcomings, the DMF remains the only hope to alleviate poverty and bring development to mining-affected regions. To make it an effective instrument for social justice, the following reforms are critical:

Reform governance: DMFs should be independent, community-led institutions rather than extensions of district administrations. Mining-affected communities must have at least one-third representation in the GC and MC.

Participatory planning: All DMFs should be required to develop five-year perspective plans based on comprehensive community consultations. These should align with district development goals but prioritise the needs of the people.

Fund utilisation in high-priority sectors: The revised PMKKKY guidelines should be strictly enforced to ensure at least 70% of DMF funds are spent on critical needs like healthcare, education, livelihoods, and skill development. State governments must be held accountable for aligning their DMF spending with national guidelines.

Independent oversight: DMFs should be subject to mandatory social audits and financial reviews by independent agencies. The Comptroller and Auditor General should conduct periodic evaluations of DMF spending and impact.

Endowment fund: Many coal-mining districts are facing a future of declining production. DMFs should create endowment funds to support economic diversification and just transition strategies for workers and communities affected by mine closures.

Improve transparency and accountability: Every DMF should maintain an up-to-date website with real-time information on fund allocations, expenditures, and project progress. A grievance redress mechanism should be established to address community concerns about DMF spending.

A decade after its creation, the DMF remains a work in progress. The problem is not a lack of funds but a lack of vision and political will to ensure the DMF serves its intended purpose. For the DMF to truly fulfil its mandate, we need urgent, systemic changes that put communities at the centre of decision-making. Anything less would be a betrayal of the very people the DMF was meant to serve.