NOTES Economic & Political Weekly EPW March 7, 2009 vol xliv no 10 105 Regulatory Authority over Minerals: A Case for Review Amarendra Das This article critically appraises the incumbent regulatory mechanism in minerals and proposes a redrawal of the authority of central and state governments. It argues that for ensuring intra-generational and inter-generational equity the ownership rights over minerals should be vested with the state governments and the regulatory power with the central government. State governments should be provided with adequate elbowroom to mobilise revenue for the development of local communities in mining areas. Therefore, the present system of uniform royalty rates determined by the central government should be removed and states should be free to determine their royalty rates and other levies. T he basic problem in the manage- ment of mineral resources is that the global and local communities unevenly share its benefits and costs, respectively. Faulty mineral management policies at national and global level are to be held culpable for this. Inadequate transfer of benefits to the local communities keeps the mining areas as the most backward regions of the world. In India, states like Chhattisgarh, Jharkhand, Madhya Pradesh and Orissa, in spite of being endowed with rich mineral resources, have remained as the most backward regions. Although these states have formulated several legis- lations to mobilise additional revenues, the national law has inhibited this. Due to revenue constraints states fail to under- take special development programmes in mineral hinterlands. In this context, this paper critically appraises the incumbent regulatory mechanism over minerals and makes a case for redrawing the authority of central and state governments. This paper is organised as follows. Sec- tion 1 briefly states the legal framework of India for the ownership and management of minerals. Section 2 gives a brief account of the institutional failure to safeguard the environment and interest of local com- munities. Section 3 explains the benefits of mining accruing to the state govern- ments. Section 4 scrutinises the state ini- tiatives to raise additional revenue, which are inhibited by the union legislation, under law and economics framework. Sec- tion 5 concludes with a proposal to amend the present regulatory mechanism. 1 Rights over Minerals Apposite institutional mechanisms are central to ensure economic efficiency and equity in sharing the benefits of mineral resources. It has been argued elsewhere that for minimising the transaction cost in the flow of minerals and ensuring sustainable development, the ownership rights over minerals should be vested with the government. 1 The Constitution of India confers the ownership rights over mines to state govern- ments. However, the central government retains the regulatory authority over all major minerals defined in the Schedule A 2 of the Industrial Policy Resolution (IPR) 1956. The regulatory power over minor minerals enlisted under Schedule B has been left with state governments. The jurisdictions of central and state governments over minerals have been clearly defined in the Mines and Minerals (Regulation and Development) (MMRD) Act 1957. The central government regulates the major minerals by controlling exploration, extraction and trade of minerals and determining the royalty rates. Section 2 provides an account of the institutional failure to safeguard environ- ment and the interests of local communities. 2 Institutional Failure Environmental costs in the mining areas are enormous and accrue in many forms, namely, deforestation, loss of biodiversity, extinction of water bodies, pollution of water (groundwater and surface water), air and noise. Social costs of mining are witnessed through many ugly faces, namely, displacement of local communities, loss of livelihood, devastation of agricultural land, health problems, and other psycho- logical trauma caused by the said reasons. These costs seem to be overburdened for they fall on the most vulnerable sections of society. The Centre for Science and Envi- ronment (CSE 2008: 3) notes that in India almost all its minerals are in the same regions that hold its greatest forests and most abundant river systems. These lands are also largely inhabited by India’s poorest and most marginalised people – the scheduled tribes and scheduled castes – who depend on the very same forests and watersheds for their survival. Fernandes et al (1997) figure out that between 1950 and 1991, mining displaced the second highest number of people amounting to 25.5 lakh. Unfortunately, not even 25% of these displaced persons have been resettled. Mining activities are regulated by a slew of environmental laws. Water (Prevention Amarendra Das (amar@cds.ac.in) is a research scholar at the Centre for Development Studies, Thiruvananthapuram.