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Mining Uncertainties

A national daily reported recently that work has stopped at the Mali Parbat mine in Odisha that was to feed bauxite to Hindalco Industries’ aluminium smelter and refinery in the same state. However, work on building named the Utkal alumina refinery – has not stopped, but its future is uncertain. This follows the announcement from Vedanta that it will shut its Lanjigarh alumina refinery in December, because it has been rendered uneconomic following the decision of the Union ministry of environment and forests in 2010 to cancel permission to mine bauxite at Niyamgiri, a few kilometres from Mali Parbat.

The Vedanta case had become a cause celebre, with activists taking out advertisements even in Hollywood’s trade paper, Variety, in the hope that someone would draw Avatar director James Cameron’s attention to what they thought was a real-world parallel to his fantasy movie. Yet Hindalco chugged along under the radar all that time, and has only now shut up shop —and not in response, reportedly, to a withdrawal of government permissions, but due to protracted local protest.

It is important to note the implications of this. First, Odisha has a stable government run by a popular regional party. Royalties from bauxite mining could have added considerably to the state government’s coffers. Yet the government was unable to push these projects through. The implication for projects in less stable political environments with less obvious pay-offs is dire. Second, objections have been raised to mining at Mali Parbat since 1996. In 1998, work was postponed due to local pressure. Rehabilitation and resettlement work only began in 2004. This timeline makes part of the problem crystal clear. Local residents have to be compensated, in advance of work on the project starting, or delays are inevitable. Areas such as Niyamgiri contain mineral resources vital for India’s development. The rest of India must expect to pay a fair price for these resources to those living in the area, who will see their environment degraded and their lifestyles upturned, which is an inevitable consequence of mining. Too often, however, those arguing the case of those demanding compensation and better rehabilitation are doing so in bad faith —from a point of view that would result in no mining at all, rather than that a rightful share of the value from the minerals accrues to locals. The fact that many of those leading or organising protests typically speak on behalf of an idealised status quo rather than for a material improvement in locals’ living conditions is central to why such disputes continue for decades.

The other problem is related to citizens’ perception of their state. Even if promises of resettlement are made, the state’s credibility is so low that few are willing to exchange the status quo for a claimed bright future. This is why mechanisms need to be designed to put compensation and rehabilitation in place in advance, not at some promised later date. The state government, which could have received ample income had the mining taken place, bears a large part of the responsibility —because it did not ensure that local concerns were addressed to start off with, through a more-than-adequate distribution in advance of the benefits from future royalty payments.

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