Srestha Banerjee

In wake of US-Ukraine critical minerals deal, much remains to be done to safeguard developing countries’ interests

Posted on by Srestha Banerjee

Critical minerals are the backbone of the green energy transition, but their supply chains present significant challenges that require urgent diplomatic attention. International diplomatic efforts must prioritise fair trade agreements, technological collaboration, and supply chain diversification.

The deal, initially proposed by the Donald Trump administration earlier this year, had required Ukraine to repay the $500 billion wartime assistance using its mineral reserves. (Reuters)

After months of twists and turns, on April 30, the US and Ukraine signed a minerals deal to establish a joint investment fund aimed at the reconstruction of Ukraine. The fund will be capitalised, in part, by revenue generated from future natural resource extraction in Ukraine, including critical and rare earth minerals, which are essential to developing rapidly growing green energy technologies and industries.

The deal, initially proposed by the Donald Trump administration earlier this year, had required Ukraine to repay the $500 billion wartime assistance using its mineral reserves. It was later revised to create a joint US-Ukraine reconstruction fund, with Ukraine committing 50 per cent of future revenues from government-owned natural resources. The US, on the other hand, will provide military assistance to Ukraine in the form of ammunition, weapons systems, or training as a capital contribution to the fund. Overall, the fund’s investments are intended to unlock further private sector interest in investing in Ukraine’s resources and attract the necessary capital for Ukraine’s reconstruction.

The agreement reflects the Trump administration’s transactional approach to mineral diplomacy. One of the key motivations for the US push to access Ukraine’s mineral resources is to reduce reliance on China, which currently controls about 75 per cent of global rare earth deposits. Since 2023, China has imposed export restrictions on several rare earth minerals to the US amid escalating trade tensions. The “compromised” deal with Ukraine is, therefore, seen as a strategic move by the US to counter China, alongside its pledge of continued military support to Ukraine.

Going forward, this deal could serve as a model for future agreements aimed at securing critical minerals, which are now essential for developing next-generation technologies, industries, and enabling a global shift towards a low-carbon economy.

The shift to a clean energy system is expected to drive a sharp rise in the demand for critical minerals and their steady supply. According to the International Energy Agency (IEA), meeting the Paris Agreement targets will require a significant surge in mineral consumption over the next two decades — more than 40 per cent for copper and rare earth elements, 60-70 per cent for nickel and cobalt, and nearly 90 per cent for lithium.

However, the supply chains for these materials are often marked by geopolitical tensions, economic imbalances, and environmental concerns. While many of these minerals are naturally abundant across different regions, their extraction and processing remain highly concentrated. For example, the Democratic Republic of the Congo (DRC) accounts for nearly 70 per cent of global cobalt supply, while China dominates almost 60 per cent of global lithium refining. This concentration creates vulnerabilities, such as market volatility and potential supply chain disruptions.

To mitigate these risks, international diplomatic efforts must prioritise fair trade agreements, technological collaboration, and supply chain diversification. Strong regulatory frameworks and corporate responsibility initiatives are essential to ensuring ethical and sustainable sourcing. Organisations such as the Extractive Industries Transparency Initiative (EITI) and the OECD Due Diligence Guidance for Responsible Mineral Supply Chains provide standards for responsible extraction and trade. Additionally, governments and global institutions should promote circular economy models that emphasise recycling and reuse of critical minerals. The European Union, for instance, has set stringent targets for recovering materials from used batteries and electronic waste, aiming to reduce reliance on newly mined resources.

Critical minerals are the backbone of the green energy transition, but their supply chains present significant challenges that require urgent diplomatic attention. Ensuring a fair distribution of such minerals is essential to support a just and equitable energy transition across borders. Developing nations rich in these resources must be supported to develop these minerals in an environmentally and socially responsible manner. International cooperation should enable resource-rich developing countries to build refining, processing, and manufacturing capabilities. Investments in skills development, infrastructure, and technology transfer can help these nations move up the value chain, ensuring they benefit from the clean energy revolution rather than just supplying raw materials.

Furthermore, South-South cooperation — where developing countries collaborate on sustainable resource management and technological exchange — should be encouraged to boost regional economic development.

Without proactive international cooperation, the rush for these resources can only deepen global inequalities and lead to geopolitical conflicts. A just energy transition demands a cooperative approach that balances economic interests with ethical sourcing, environmental sustainability, and equitable access to mineral wealth.

 

A Trillion-Dollar Dilemma: War Budgets vs Climate Funds

Posted on by Srestha Banerjee

It was a grim reality check that the world prioritises fortifying borders over securing a liveable planet.

In an era defined by the twin existential crises of security and survival, two pledges stand as examples of human ambition and the competing narratives in 2024.

On one side is NATO’s defence spending of over $1.4 trillion reported in 2024 (with most members stepping up on their war spending with a floor of 2 percent of their GDP) – an amount steeped in the urgency of geopolitical tensions and an evolving war landscape.

On the other is the global demand to mobilise $1.3 trillion for climate action in developing nations – a lifeline for countries most vulnerable to the ravages of climate change, yet least responsible for its causes.

Two Fronts in the Fight for Better Life

The proponents of the NATO pledge argue that in an era of resurgent authoritarianism, territorial disputes, and warfare, military investment is not a luxury but a necessity.

The war in Ukraine has been a reminder for many countries that peace cannot be taken for granted, and deterrence requires resources.

To NATO allies, this is about preserving sovereignty, democracy, and the global rules-based order – a narrative that resonates deeply in a fragmented world.

They rallied for a $1.3 trillion climate finance pledge by the developed countries, which echoed, not only a call for delivering on climate action, but also responding to justice.

These nations face threats of supercharged storms, floods, and droughts, that threaten to erase communities and economies.

Their call is simple yet profound: the industrialised world, which grew wealthy through carbon-intensive development, bears a moral responsibility to fund their transition to greener futures and build resilience against the climate crisis.

At Baku, various developing countries including India, indicated the urgency of climate financing to save the lives and livelihoods of millions of people who are among the most economically insolvent.

The flow of finances for strengthening adaptation measures for these people is extremely important, not only to prevent them from slipping into further distress, but also to ensure justice and equal opportunity in a greener economy.

The requirement for this is substantial, as both mitigation and adaptation measures are costly to put in place.

For example, India’s Economic Survey report this year noted that the country’s adaptation expenditure in 2021-2022 was about Rs 13.35 lakh crore, which amounted to about 5.6 percent of the country’s GDP.

At COP29, India called for a boost of in adaptation finance, indicating that building adaptation capital could rise to over $854 billion.

The Geopolitical Dilemma of the Urgent vs the Essential

The simultaneous existence of these figures reveals a broader geopolitical tension: the challenge of reconciling the urgent with the essential.

Many within the corridors of Baku’s COP pavilion argue that defence spending highlights a paradox: resources can be swiftly mobilised for war, yet climate action commitments often languish unfulfilled.

In 2009, developed countries pledged to mobilise $100 billion annually in climate finance by 2020, a target that remained unmet for the longest time. Even when it came, a large proportion (over 69 percent) was in the form of loans that added to the debt burden of many developing countries.

Therefore, skepticism abounds over the controversial New Collective Quantified Goal (NCQG) to scale up financing to developing countries to at least $1.3 trillion per year by 2035, in which developed countries have pledged to take the lead to mobilise $300 billion.

However, on the other hand, it is only likely that the defenders of defence spending will argue that without security, there can be no climate action.

Just Transition a cross-cutting agenda at COP29, but finance and inclusion remain loose ends

Posted on by Srestha Banerjee

 

As countries prepare to update their climate pledges under the upcoming Nationally Determined Contributions (NDC) 3.0 cycle, Just Transition is emerging as an essential cross-cutting agenda to strengthen the action of mitigation, adaption, and resilience measures by various countries.

The draft negotiation text of the United Arab Emirates Just Transition Work Programme (UAE-JTWP) has underscored the “multi-sectoral and multi-dimensional nature of just transition” that cuts across all the pillars of climate action. This comprehensive approach envisions addressing not only the carbon transition but also the socio-economic transformations it entails. Therefore, to ensure a Just Transition, or move away from fossil fuels, requires a ‘whole-of-economy’ approach.

Where are we on actionable steps?

An important agenda for COP29 this week will be to frame actionable steps under the JTWP to enable countries to design and implement Just Transition measures, aligning with climate commitments under the Paris Agreement. While each country’s journey to a Just Transition will be based on unique national circumstances, including socio-economic conditions, resources, and priorities, some clear actionable steps can ensure collective and timebound action.

The second annual inter-ministerial roundtable held in Baku on November 18th brought to light some steps that must be enforced through the work programme.

A key one in this regard is the need for strong financial commitments to support Just Transition measures in developing countries. There is a strong sentiment from the negotiators that this requires significant public investment to ensure a fair and inclusive transition. The emphasis should be on prioritizing public finance as the primary driver, rather than high reliance on market mechanisms or investments driven by profit. By placing public finance at the forefront, international institutions can address the social and economic challenges of transition, ensuring that the process is equitable and aligned with long-term development goals.

The other aspect is to guide Parties and build their capacity to develop comprehensive Just Transition policies and plans that can be suitably integrated into the updated NDs, National Adaptation Plans (NAPs), and also development plans.

Finally, there is a need to specify measurable targets, especially short and medium-term targets, to achieve long-term outcomes.

With such measures put in place through the JTWP, Just Transition can be a huge opportunity to support inclusive and green economic growth in developing countries, and not undermine their developmental ambitions. 

 

Listening to voices beyond decision-makers

Besides these, an important issue for Just Transition will be to create appropriate platforms, to ensure representation and participation of various stakeholders.  Mr. Nabeel Munir, the Chairperson of the Subsidiary Body for Implementation (SBI) to the UNFCCC, in his opening remarks at the inter-ministerial roundtable emphasized that a transition “will never be just if the floor is only given to the decision-makers.”

The JTWP should therefore design spaces where diverse voices can actively contribute to decision-making. This inclusivity will help to bring to the floor the unique challenges and needs of those most affected by the transition, making policies more responsive and grounded in local realities. Such an approach will also build trust, legitimacy, and broader support for Just Transition action and make it truly a people’s agenda.

 

How India can meet its Glasgow promise: From reforming discoms to recruiting skilled energy managers, the list of reforms is formidable

Posted on by Srestha Banerjee

From reforming discoms to recruiting skilled energy managers, the list of reforms is formidable.

On the first day of the Glasgow climate conference – COP26 – the biggest announcement came from India. Ending speculations on whether India ‘will’ or ‘can’ make a net-zero pledge, Prime Minister Narendra Modi announced that the country will reach net-zero emissions by 2070. He also announced four major nearer-term targets exhibiting India’s will and ambition on climate action.

The targets, all of which are to be met by 2030, include an installed renewable energy capacity of 500 GW (up from 450 GW target); meeting 50% of the electricity requirement through renewable sources; reducing total projected cumulative carbon emissions by 1 billion tonnes between 2020 and 2030; and reducing the carbon intensity of GDP by 45% from 2005 levels (up from the 33-35% target).

So how ambitious are these new targets?
India’s renewable energy targets mean that coal power will peak before 2030, when about 70% of India’s electricity installations will be renewable-based, battery and smart grid will dominate the market. This would be one of the most rapid decarbonisations of electricity sector anywhere in the world.
India’s net-zero target is equally ambitious, but few more details are required to understand what it means. There is confusion on whether the target is for all greenhouse gases (GHGs) or only for carbon dioxide (CO 2). If it is for all GHGs, then India’s target is compliant with 1.5°C warming. If it is only for CO 2, it is 2.0°C compliant. However, even if only for CO 2, it is still a strong signal to decarbonise the economy. As zero-carbon technologies become more accessible, India will update this target to attract massive global investments.

What domestic reforms do they demand?
In nutshell, these announcements have put India in a leadership role on climate mitigation action. The question now is, what are some of the major steps that must be taken domestically to steer the course of action in the coming years? There are three ‘make or break’ factors for realising India’s ambitious targets.

  • Firstly, if 500 GW of power-generation capacity must be achieved, India must create an enabling environment for attracting global investments. Reforming the distribution companies (discoms) is most important to create that environment.
  • Secondly, for meeting 50% of electricity supply through renewables, India’s grid infrastructure will have to be strengthened and battery storage capacity will have to be massively increased. Investing in smart grid and battery infrastructure is crucial for this.
  • Third, a huge skilled workforce will be required to run the new electricity infrastructure. This means investments must start in reskilling of existing and skilling of new workforce to meet the future requirements.
  • Finally, all of these changes in the energy and industrial systems must be paralleled by a plan of just transition, to ensure that we do not carry forward the legacy of unequal development challenges of the coal era, into the new era of renewable energy and a greener economy.

In fact, while energy transition has been a hot topic on the policy and business front, just transition has not got the due attention. However, as coal power will peak before 2030, it is time for India to start policy deliberations, develop plans for, and consider investing in it. And this is why it is crucial.

Could renewables mean unequal development?
India’s energy geography will change because of massive investments in renewables. Today’s coal-producing states will not be renewable superpowers. The renewable energy will be generated in western and southern states.
Therefore, as the share of non-fossil fuel energy grows, the coal regions can spiral into a poverty trap, which many of the districts here are already saddled with. There can also be huge social instability triggered by job losses and uncertainty of income opportunities. An estimated 20 million plus workers will be impacted countrywide by the transition. In fact, the disproportionately high number of informal workers in our key economic sectors such as coal mining, transportation, steel, cement etc adds to the challenge. But all this can be avoided through a well-planned and well-managed just transition over the next decades.
Planning a ‘just’ energy transition will be a smart move by the government to further a development agenda that benefits all. We have the next 30 years to complete the transition, but the process must start now.

The writer is Director, India Just Transition Centre, International Forum for Environment, Sustainability & Technology (iFOREST)

Centre’s power on mining decisions increased under MMDR Amendment Bill 2021: What does it mean for DMF implementation?

Posted on by Srestha Banerjee

The Government has introduced an amendment bill in the Lok Sabha on March 15, to further amend the Mines and Minerals (Development and Regulation) Act, 1957.  Amendments have been proposed on a number of issues related to mining, including auctions, clearance and permit validity of mine leases, functioning of District Mineral Foundation (DMF) Trusts, among others. What comes across clearly from an overall reading of the MMDR Amendment Bill 2021, is that it increases the power of the Central Government in almost all aspects of decision-making on mining.

One of the most significant amendments in this regard is taking decisions on matters of DMFs. The Government had instituted DMF by amending the MMDR Act in 2015 to improve the social responsiveness of the mining sector. As specified in the law, the objective of DMF is to work for the interest and benefit of areas and people affected by mining and related activities.

The State Governments were entrusted with the primary responsibility of setting up DMFs in every mining district (of the respective state), through a notification.  At the same time they were also vested with the power to prescribe the composition and functioning of DMFs.

The 2021 Bill proposes to increase the Centre’s say on matters of DMF. It has been specified that the “Central Government may give directions regarding composition and utilisation of fund” by the DMF.

The question is, what does this mean for DMF implementation, if the Bill becomes a law.

To answer this, it is important to consider what has been going on with DMFs in various states, and whether a direction from the Centre is necessary on its composition and functioning.

The MMDR Amendment Act 2015, under which DMF has been instituted, specifies that its composition and functioning, should be guided by three important people-centric laws. These include, the constitutional provisions as it relates to Fifth and Sixth Schedules (for governing tribal areas), provisions of the Panchayats (Extension to Scheduled Areas) Act (PESA), 1996, and the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 (in short the Forest Rights Act).

However, the DMF Rules as developed by most State Governments frustrates this. This has also been affecting DMF implementation.

First let us consider the composition of DMFs. Barring a handful, DMFs in most states/districts are dominated by officials and political members. This is true even for DMFs in Scheduled districts. There is negligible representation of Gram Sabha members, or general mining-affected people in the DMF body. This has resulted in top-down decision making. In most top mining districts, the affected community for whom DMFs have been developed, barely have any knowledge of it, or have any say about how it operates.

Second is the issue of DMF functioning and fund use. In nearly six years time, while more than Rs. 45,000 crores have accrued to DMFs across various districts in India, there is little perceptible change on ground with respect to development indicators, and basic factors of human well-being.  

A major reason for this is lack of planning. Barely any DMF Trust has developed a DMF plan to use the funds in a targeted manner, and as per the need of the people who are the beneficiaries. This has led to ad-hoc decisions on fund use, without prioritizing issues where intervention is necessary. Just one example shows this clearly. While poverty and livelihood are critical issues for the mining-affected people, no substantial investment has happened. In the first five years, most districts have spent only 0-4% of  the DMF budget towards this. Equally neglected areas have been child development, healthcare etc. in many districts. At the same time, there has been no significant effort for delineating the mining-affected areas, or identifying the mining-affected people.

The Centre’s intervention, which the 2021 Bill now suggests, presumably can help to improve DMF implementation, if the right directions are given. The Pradhan Mantri Khanij Kheshtra Kalyan Yojana (PMKKKY) guidelines must also be revised considering the current challenges with DMFs.

What is urgently required for the states, is to revise their DMF Rules. This is where the Centre can issue necessary directions. This can include directions on:

  • Revising the composition of DMF to include Gram Sabha members from directly mining-affected villages/panchayats (or ward members) in the DMF Governing Council. At least 10% of the members should be from directly affected villages (or wards if an urban area).
  • DMF planning, including preparation of annual action plans, and perspective plans, by engaging experts.
  • Identifying and notifying the beneficiaries (the mining-affected people) and delineating the mining-affected areas to improve effectiveness of fund use.
  • Setting up of DMF office in districts for purposes of coordination, planning, monitoring, and public disclosure of information. There is already 5% of DMF funds available for this.
  • Establishment of a state-level monitoring and co-ordination committee, for monitoring and co-ordination of DMF operations in various districts.
  • Improving accountability by information disclosure in public domain, and mandating both financial and performance audits of DMF Trusts.

The bottom line is, the Centre’s increase in power to intervene on DMF implementation, should not mean more top-down control. The directions must uphold the spirit of DMF, which is of a people-centric institution.

Jharkhand contributes to 32% of the country’s reserves but loses more than it gains from coal

Posted on by Srestha Banerjee

In an exclusive conversation with iFOREST, the Chief Minister of Jharkhand, Shri Hemant Soren, talks about the role of coal in Jharkhand’s economy, and the need to develop other economic sectors to transition to a non-coal economy.

Q. 1 How important is coal for Jharkhand in the present day?

Jharkhand is one of the few states in the country that is blessed with rich mineral wealth. The state contributes to 32% coal reserves in India. Although, coal has always been an important resource for revenue generation for the state. But the state has not attracted investments worthy of its endowments. 
Additionally, lakhs of tribal and indigenous people have been displaced from their lands without proper rehabilitation benefits. It is therefore an irony that Jharkhand illuminates the country with its coal but is forced to live in darkness. Coal is important to Jharkhand but not at the cost of huge societal and environmental loss.

Q2. Is Jharkhand benefiting from coal as expected?

The abundance of mineral wealth has been a resource curse for Jharkhand. The state contributes to 32% coal reserves in India. However, the benefits accrued to the state aren’t in the same proportion and we lose more than we gain. There’s DMF which allows some developmental activities in the mining affected regions and communities, but its functioning needs to be streamline.

Q3. Under what conditions do you want to increase coal production in the state?

With the increase in coal production, state revenue will also increase. However, our government is determined to safeguard the interests and rights of people and state. The Union Government has opened up auctions for commercial mining within the coal sector. The auction area also includes Jharkhand. However, I had requested the central government to provide a moratorium of 6-9 months. In this regard, I had written a letter to Hon’ble Minister of Coal, Mines & Parliamentary Affairs, Government of India requesting that due to COVID-19 pandemic, many domestic/foreign players might not participate in the auction process due to travel restrictions and several enterprises facing financial liquidity crunch.
My government also wants to ensure that steps taken for sustainable mineral development are in harmony with prevalent social and environmental practices and the adverse costs on tribal populace and the ecologically fragile zones do not outweigh the benefits that we might get economically. 

Q4. What do you think are the challenges of coal mining in environmental and social terms? How is the Jharkhand government planning to offset or deal with these?

Over all these years, Jharkhand has been forced to drink ‘laal-paani’ and ‘kaala-paani’ due to mining activities. Many people were forced to leave their land. Those left behind were exposed to severe diseases and complications. As a result, much more deliberations are required with various stakeholders for creating a conducive policy framework. Thus, it is vital that a balance is struck between societal expectations, environmental preservation and economic growth.

Q5. The Intergovernmental Panel on Climate Change (IPCC) report has spoken about phasing out coal for climate change concerns. Do you think Jharkhand can transition to solar and wind energy from coal? If yes, how long do you think this transition will take? If no, what are the alternatives?

Climate change related issues are increasing at an alarming rate. Due to the erratic changes in climatic conditions, it is mostly those at the margins who are most affected. Therefore, switching to renewable energy resources becomes essential. My government is committed to exploring alternate energy resources, especially solar energy for both electrification, saving unforeseen costs of conventional sources and also for facilitating micro irrigation to farmers and farmers collectives.

Q6. A new concept called Just Transition in coal mining areas has been emerging. The basic idea is that local communities in coal mining areas/ coal districts should not become the victims of coal phase-out in the next 20/30 years as the IPCC report says. Therefore, it says that economic opportunities should be created for mining dependent communities in these areas. Given this, is the Jharkhand government open to developing a Just Transition plan in coal mining areas? If yes, what should be the major components of the just transition plan?

I have not heard much about the Just Transition concept. But my government welcomes any concept that provides equity to people and other stakeholders affected from coal mining, directly or indirectly in districts and zones affected by mining. 

Q7. A key component for transition towards a non-coal economy will be diversification of economic opportunities. What are some of the economic sectors in the state with growth opportunities that can substitute for the revenue and employment that the coal industry currently provides?

Jharkhand is rich in minerals. But it has also been endowed with rich and diversified natural resources across the state. Tourism is one of the sectors which has been left untapped until now. We have so many states in India which generate revenue by focusing solely on Tourism. Not only does it create revenue but also promotes conservation and sustainable use of natural resources. Although post COVID 19 recovery will take time, we are focused to create a nature-based tourism plan to attract citizens across the country towards natural beauty and alternative indigenous living practices, prevalent in the state. 

The other is NTFP (Non-Timber Forest Produce) based economy in Jharkhand. The NTFP based economy has never been given due attention until now. My government is working on strengthening the overall structure of NTFP based backward and forward linkages. I believe that with due policy in place – not only the tribals and forest dwellers will get a decent income but it will also accentuate sustainable use of natural resources. Jharkhand also has great potential for renewable energy, pharmaceuticals, textile and other rural based industrialization initiatives. We are also going to soon start a process to map out specific enterprises/ industrial units that could be promoted/ developed to boost our rural economy and economic resilience. 

Q8. Which social security measures should the government prioritize to facilitate a well-planned transition? What can be the main revenue sources for it?

We have been committed to ensure social inclusion in all our programmes in this brief 6 month period. We will also soon launch the Urban Wage Guarantee Initiative, a first in its country and want to understand how a safety net for intra-state workers could be created in urban and peri-urban areas through state commissioned public works. Jharkhand is blessed with an industrious labour force. Our government prioritizes keeping welfare and pride of the labour force and other people intact. Keeping this as our priority, we promoted direct engagement with the Border Roads Organization (BRO) when they had approached Jharkhand for labour force. Our government is working on developing a plan and policy measure to ensure the rights and welfare of the people of Jharkhand especially towards responsible business practices and establishing an aspirational and responsible migration pattern in the future, contrary to the distress migration that has been practiced. 

Q9. What is your opinion about the political momentum / or support for transiting to non-coal economy in the mining districts? How do you think a favorable political will can be built?

Jharkhand Mukti Morcha (JMM) has always fought for the rights of people of Jharkhand. We always support less extractive and more equitable platform for our state. Our coalition government and JMM welcome any opportunity to promote equitable opportunities for both industries and people.  

Q10. What do you think that can be done to build a multi-stakeholder consensus and engagement for a transition?

Multi-stakeholder consensus cannot be attained unless there is democratisation of processes. We have the political will to do that and will deliberate more once the larger socio-economic picture is clearer. We also need time – I spent 4 months tackling COVID-19 and it has been a learning time. There are several plans but definitely they will be laid in the times to come.

DMFs need planning and administration reform

Posted on by Srestha Banerjee

The Ministry of Mines has proposed a set of mining reforms to boost India’s economy and create employment opportunities in the wake of COVID-19 pandemic. The objective of the proposed reforms, as the Government suggests, is to realize the vision of “Atmanirbhar Bharat”. 

 

The ongoing pandemic has certainly come as a harsh reminder of how important it is to strengthen our economic base, and advance livelihood opportunities that are less vulnerable to social disruptions. Appropriate policy measures to ensure this is the need of the hour. 

In India, we already have a number of laws and regulatory provisions, that have strong underpinnings for improving local economy and reducing vulnerability of local communities. 

District Mineral Foundation (DMF) as instituted under the Mines and Minerals (Development and Regulation) Amendment Act, 2015, is one of the most significant ones in this regard. 

DMFs are in place in 583 districts, spread across 21 states of India. The funds of DMF, that come as a mandatory payment by miners operating in these districts, currently stands at nearly Rs. 40,280 crores. So far, about 41% of this money has been spent on various developmental works, as per latest government records. 

As per the law, creating sustainable livelihood opportunities, and improving people’s employability through skill development, are among the ‘high priority areas’ of DMF investments. Other priority sectors include, healthcare, education, women and child welfare, clean water supply, sanitation etc. How the money can be spent on these issues, must be determined in a planned way through a bottom-up process. What these essentially mean, is that, if implemented well, DMFs have huge potential to create income opportunities that are sustainable and secure, and improve overall developmental outcomes of some of the country’s poorest and most vulnerable people. 

Tangible asset creation will lead to misplaced DMF investments

As a component of the mining reforms, the Ministry of Mines has proposed to revise the rules and guidelines pertaining to DMF, to “improve the focus of DMF funds towards creating tangible assets” in mining-affected areas. However, this is a highly problematic proposition and will create huge scope of fund misuse. 

The focus on ‘creating tangible assets’, will make DMF any other development programme. This is not why DMF was developed. DMF has been instituted with the precise purpose of improving the lives and livelihoods of mining-affected people and areas. The law and guidelines (the Pradhan Mantra Khanij Kheshtra Kalyan Yojana), make it clear that this will require planned investments in both hard and soft resources.

However, if creation of tangible assets is prioritized, it will lead to heavy spending on physical infrastructure, and undermine the importance of investing on soft-resources, which are crucial for improving various development outcomes. For example, in mining-affected areas of most districts, a primary reason for poor healthcare is not that we do not have buildings; there is a severe shortfall of doctors, staff nurses, laboratory technicians, medical equipment, ambulances etc. Low income among people and lack of health insurance, makes it difficult for them to access private or well-equipped facilities. Similarly, for education, the biggest reason of high dropouts or poor learning outcomes among children is that there is a shortfall of good teachers, regular staff, and other facilities in the schools. 

The penchant for tangible assets will also severely undermine the scope of investments on livelihood, the key ‘purpose’ of the reforms. The trend of DMF investments over the past 5 years shows that, most states and districts have spent the least on livelihood and income generation components for local communities in the rush to ‘build’ something. The allocation towards this, accounts for only 0-4% of the total budget, while infrastructure development in all sectors, including major roads and bridges, account for the major share of investments. 

If the Government wants to improve DMF implementation, it should provide clear directions on DMF administration, planning and investments, to ensure that DMF funds are effectively used to benefit the people who need it most, and in the best possible way. Here are six crucial points on which directions need to be given:

  1. DMFs must identify the mining-affected people, the beneficiaries of this fund. Not identifying them until now has been one the major drawbacks of DMFs, and has left out some of the most distressed people.
  2. In most states and districts, there is no clear guideline till date to identify and delineate directly and indirectly mining-affected areas. This task must be prioritized to make investments targeted.
  3. Districts must have proper and dedicated administrative set-up for DMFs.  This will help in DMF planning and co-ordination, which is necessary to optimize DMF fund use. There is already scope of using up to 5% of DMF budget for this.
  4. At least 60% of DMF funds must be used on directly mining-affected areas, alongside on ‘high priority’ issues.
  5. To prevent the scope of fund mis-use and improve development outcomes, a cap should be prescribed for the percentage of DMF funds that can be spent on infrastructure development in any sector. The Government has deliberated on this earlier, and a 20%-30% cap can be prescribed. 
  6. Finally, there is no alternative to DMF planning. Ad hoc directions cannot resolve the problem with DMF investments. Every DMF must develop annual and perspective plans considering the local context. Our Constitution and governance mechanisms have repeatedly recognized the merit of local level planning. 

DMF Rules and guidelines certainly require a re-look and reform. The Ministry held a meeting on this in January 2019, and recognized the need of a much comprehensive set of directions that states and districts should follow to optimize DMF fund use. We need a reform for DMF that will truly make local communities ‘atmanirbhar’ and ensure their long-term security. This will require focus on creating sustainable livelihoods and deep investments on social infrastructure, not just a focus on creating tangible assets. 

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