Where is the DMF money meant for people living in mining areas going?

In Madhya Pradesh’s Singrauli district, one of the biggest and most polluted coal mining and thermal power hubs in the country, funds meant to drive development for the people living there, have been used for the construction of an air-strip. For communities that have been bearing the brunt of mining pollution, development in the form of a space for aircrafts to land, reflects the imbalance between the purpose and implementation of the District Mineral Foundation (DMF) funds.

DMFs were introduced in January 2015 by the government of India in all districts in the country affected by mining-related operations. The provision was hailed as a golden pill for the upliftment of such areas. Now, six years later, it has failed to deliver on its promise and is stuck in a bureaucratic- and politician-heavy approach.

The provision was brought through the Mines and Minerals (Development and Regulation) Amendment Ordinance, 2015 which called for establishing the DMFs in all mining-affected districts and using funds collected under this for the welfare of people of such areas. It was followed by the government, in February 2015, introducing the Mines and Minerals (Development and Regulation) Amendment Bill, 2015 to amend the 1957 version of the law in Lok Sabha which passed it in March 2015.

In September 2015, the government notified the rates of contribution payable by miners into the DMFs. It said in case of all mining leases executed before January 12, 2015, miners will have to contribute an amount equal to 30 percent of the royalty payable by them while in case of mining leases granted after that, the rate of contribution would be 10 percent of the royalty payable.

Following this, by now, the DMFs have been constituted in 574 districts in 21 states with about Rs. 41,650 crore (Rs. 416 billion) till September 2020.

The exact composition and functions of the DMFs were to be decided by the state governments but the amendment of the law had specified that use of this fund has to be in line with the provisions of the Panchayats (Extensions to Scheduled Areas) Act, 1996 and Forest Rights Act, 2006. Experts and civil society leaders note that it has not been the case.

Srestha Banerjee, who works as the natural resources programme lead with the International Forum for Environment, Sustainability and Technology (iForest), a think-tank working on environmental and sustainability issues, noted that government’s approach to ensuring the use of the money available under the DMF mechanism is top-heavy where the trusts responsible for their use are dominated by officials and politicians.

“This packing of the DMF body with politicians and officials who are to take decisions on how the DMF money should be used,  with little representation of the local people ensures that the true spirit of the DMFs is not reflected in the projects that are decided in mining-affected areas.  The idea enshrined in the law related to DMF was to ensure that it is used for the welfare of ming affected communities, including tribal and forest-dwelling communities, by including them in the decision-making process. The law thus required DMFs to function in line with our Constitutional provisions as related to Scheduled areas, the FRA and PESA. But that has not happened and that is among the biggest problems of the DMF so far.”

Chinmayi Shalya, an independent researcher, who has worked on the issue of DMF, said “DMF is a very special fund” as it was “created to benefit a specific section of people – the mining-affected communities” and because “it is not tied to any specific scheme or specific area of work.”

“The fund does not lapse at the end of a financial year, like many other funds. It keeps accumulating in the DMF Trust account. These provisions give a huge scope to plan its use for more than what other schemes provide for, improve and expand upon what already exists and innovate beyond that as well,” Shalya told Mongabay-India.

In India, the share of the mining and quarrying sector is less than two percent of the country’s gross domestic product right now but the government aims to at least double by 2023. Without effective transition policies, ambition could negatively impact the communities living in and around mining-affected areas.

In many mining areas across the country, the lives of the affected communities and biodiversity including forest and water bodies have undergone a transition for the worse. People are facing pollution of their natural resources and their agriculture yield has been impacted. The development that was promised to them in lieu of minerals being extracted from their land has not reached them.

The governments have realised that the transition of mining areas has not been ‘just’ for many people. In December 2020, while speaking at a function of the Confederation of the Indian Industry, Chairman and Managing Director of Coal India Limited Pramod Agrawal said that in order to help grow the mining activity, it needs to be sustainable through reducing air, water pollution and reducing the carbon footprint.

Funds under the DMFs were meant to bring a positive transition in the lives of such communities but the programme seems to be derailing.

Read more: [Video] Is mining in India ‘just’ for the environment and communities?

The use, misuse and abuse of the DMFs

The years gone by are in fact a witness of many stories of DMF’s use, misuse and abuse.

For instance, Rajesh Tripathi of Chhattisgarh-based Jan Chetna Manch, a social group working for the mining-affected people, said over Rs. 250 crore (Rs. 2.5 billion) were collected for Raigarh district under the DMF-related provision but there is no transparency on how it was used.

“According to DMF rules, the funds collected were to be used for the benefit of mining-affected people but a major portion of this fund has been used in other areas of the district which have nothing to do with mining. It happened because the bodies that are tasked with use of this fund are headed by a legislator of that area,” Tripathi told Mongabay-India.

He said these bodies driving the use of DMF funds are led and controlled by politicians and district administration with zero participation of the locals who have no idea about this fund. “There is absolutely zero transparency and accountability. When we sensitise villagers about it we realise that no work has been done by the government to spread awareness about this fund among villagers,” Tripathi said.

He emphasises that the DMF implementation mechanism talked about provision of conducting a social audit of the works granted under it. “In Raigarh, about 950 projects were sanctioned and of that, about 450 have been completed but their social audit has not yet been conducted,” said Tripathi.

Chinmayi Shalya said, “Currently, most of the DMF use across mining districts in the country shows that the fund is used mostly for physical infrastructure for which other departmental funds are available.”

“This shows a lack of planning or even a basic need-assessment at the district level for optimal and effective use of DMF funds. There is a glaring lack of attention towards improving the well-being of mining-communities through better investments in healthcare, nutrition, availability of clean water and creating income security,” she said.

Shalya cited a recent example of Madhya Pradesh’s Singrauli district, one of the biggest and most polluted coal mining and thermal power hubs in the country, where a part of DMF funds was used for the construction of an air-strip.

“This is brazen misuse of a fund meant for communities which have been bearing the brunt of not only poor amenities and facilities, but also saddled for generations with effects of air, water and soil pollution,” she said.

However, there are some good examples as well that shows how the fund can be used constructively.

“For instance, Keonjhar and Sundargarh districts in Odisha have used DMF funds for local livelihoods through millets … they are using the produce to add millet-based foods in the ICDS (Integrated Child Development Services) scheme for better dietary diversity and nutrition. Bijapur and Dantewada districts in Chhattisgarh set up IPHS (Indian Public Health Standards) compliant hospitals with full staff and doctors through the DMFs,” she noted.

In fact, in August-September 2020, the central government proposed mining reforms that talked about the use of the DMF fund for creating tangible assets in mining-affected areas – something that experts criticised stating that this will be misused and the mining-affected communities will be deprived of this money.

Read more: India proposes overhaul of mining sector amid concerns over legality and social impact

Poor participation of mining-affected communities

One of the main reasons highlighted by experts in the proper use of the DMFs funds is that the money spent is being decided by bodies packed by bureaucrats with negligible participation of local communities.

Amarendra Das of the School of Humanities and Social Sciences at the Indian government’s National Institute of Science Education and Research (NISER), explained that the issues with DMF are multifaceted. “The money under the DMF was supposed to be used by the local bodies in villages and districts in accordance with their needs. But the process is hampered by bureaucracy, who instead of allowing the usage of funds in a decentralised manner, is pushing big projects on block and district level.”

“For example, rather than every village having their own drinking water system or local interventions that generate local employment and involve local decision making, the officials are calling for mega drinking water projects which get stuck on one level or another, decided without the involvement of villagers and devoid the locals of work and earning opportunities. Many times such projects get stuck and remain incomplete,” Das told Mongabay-India.

“There is a clear problem of mismanagement as a result of which, the mining-affected communities don’t get the benefit of the fund that was collected after taking away their resources,” he said.

Read more: Is joint community ownership the way forward for mineral governance in India?

DMF funds may not be reaching mining-affected communities

Of the Rs. 416 billion collected under the DMFs (till September 2020), about Rs. 177.66 billion have been spent. But experts note that the money is not being spent in conformity with the idea it was created for.

iForest’s Srestha Banerjee remarked that the “DMFs are operating with little knowledge of people who are the beneficiaries, even as data related to the funds under it etc was supposed to be shared with the public at large.”

“So far, most of the states and districts have failed to optimize the opportunity to address the injustice with the mining-affected communities. DMF is being treated as any other development or infrastructure fund while it is far beyond that. The spirit of DMF is natural resource benefit sharing. ” she said.

Chinmayi Shalya said for DMFs to function effectively, the decision making “needs to involve mining-affected people, the directly affected areas and affected people need to be clearly identified and notified.”

“A long-term planning exercise needs to be mandated so that funds are used wisely and no duplication with other schemes happens. Districts must be equipped with resources and expertise to plan effectively and improve upon and go beyond the existing public welfare schemes.  Awareness and capacity of local communities should be built to partake in decisions and monitor the works under DMF,” she said.

She stressed that for the DMF mechanism to succeed, districts must focus on the delivery of services rather than a spree of creating only infrastructure, engage local partners for implementation. Livelihoods, with a focus on natural resources like forests, agriculture etc, as they will be key in improving local economy and incomes.

Read more: People living near mining activities at increased risk of diseases, says study

Banner image: Coal mining is a significant contributor to the funds collected by the DMFs. Photo by Mayank Aggarwal/Mongabay.