The government is determined to implement a policy intended to give those displaced by mining a share in the profits of the miners despite a less than enthusiastic response from industry, the minister for mines said on Thursday.

The policy, part of a legislation setting the rules for investment in mining, will also apply to captive mines of companies such as Tata Steel, SAIL and Hindalco. The bill, if approved by Parliament, could make it mandatory for companies to issue equity shares to each member of every family displaced by the project as well as 26% of the profit, according to a draft version of the bill, minister for mines BK Handique said.

In what could pose severe logistical challenge for companies as well as the government, Mr Handique suggested that the benefits of the policy should apply not only to new mines but also to existing ones and those whose leases come up for renewal. This could happen if the local administration is able to identify those displaced in the past. Mines generated profits for their owners for decades, and those who had lost their land in the past should also benefit, he said.

“The state governments are firmly backing this proposal and I will ensure that it is part of the new mining law,” Mr Handique said in an interview. “This is in line with our focus on sustainable development.”

The draft of the Mines and Minerals (Development & Regulation) Bill, 2010, being prepared under the supervision of a group of ministers, has endorsed a proposal stipulating that all resource operations of what it describes as “standalone companies” share 26% of their net profit on an annual basis with the people affected by the project.

Lukewarm reception from mining cos

They will also have to offer one share to each individual from displaced families.

The government’s thinking is that if affected persons share profits arising from mining operations, resistance from the local population whose land has to be acquired for industrial projects would dwindle.

The proposal has had a lukewarm reception from mining companies. Tata Steel, India’s largest private steel company with its own iron ore and coal mines, said locals should be made to benefit through gainful engagement rather than equity stakes and profit-sharing.

“The thrust should be on building capacities and not on distributing money, which will defeat the intended objectives. There should be a mechanism for smooth implementation and monitoring where the government and industry take joint responsibility for improving the delivery system so that the benefits reach the targeted people,” the Jamshedpur-based steelmaker said in an emailed response.

While Hindalco and Jindal Steel could not be reached for their comments, CS Verma, chairman of state-owned SAIL, was cautious in his reaction. “There is no clarity so far on how it will apply to captive mines that are cost centres,” he said in a response.

If the bill is passed, metal companies could be required to hive off captive mining operations and offer shares in these as well as part of the profit for the lifetime of the mine. Companies will also be free to offer equity and profit in their larger metal operations on a voluntary basis.

Standalone mining companies such as NMDC and Sesa Goa will also have to follow the same principle while rewarding project-affected families with a share in profit and equity.

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