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Analysis of Mining Operation in Orissa

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1.1 Discrimination in fixing coal royalty

Mineral royalty has been increasing over the years. However, the royalty from Coal constitutes more than two-third of the total mineral royalty of the State. But the State is being neglected due to the royalty rate on Coal fixed by the Government of India from time to time.

There are seven grades (Grade-A, B. C, D, E, F and G) of Coal available in India. Of these, Orissa does not have Grade-A Coal, i.e. cooking coal. It has been found that F and G grade coal (power grade[1]) constitute 93.5 per cent of the total production. In 1971, the royalty on the best quality coal (selected grade) was Rs. 1.90 per ton whereas; it was Rs. 1.70 on the lowest grade. This shows that the royalty on the highest grade coal was 11.76 per cent more than that on the lowest grade. But this gap between the highest and the lowest grade royalty rate has increased to 160 per cent with respect to 1981 revised rate, 380 per cent as per 1991 revised rate, 290 per cent in 1994 and 300 per cent with respect to 2002 revised rates. This also shows a sluggish growth rate of royalty on F and G grade coal, as compared to the much higher royalty growth rate in case of A grade coal. On the other hand, in case of Andhra Pradesh, the royalty has been fixed on an average Rs. 90 per ton irrespective of the coal gradation as per 2002 revised rates. In fact, a large share of coal in Andhra Pradesh belongs to D, E, F and G group. Had it been fixed on an average, considering the availability of categories of coal, it would not have been more than Rs. 75 per ton. It is one of the many examples of discrimination with respect to mining in Orissa. In spite of such discrimination, the revenue from the mining sector in Orissa has been increasing. It is because of the increase in the exploitation of minerals (as mentioned earlier).

1.2 Export

As mentioned earlier, more than 50 per cent of minerals are being exported to foreign countries without value addition. However, it is found that the export value of minerals and mineral based (metallurgical) items as a percentage to total export value from Orissa to foreign countries is 90.26 per cent in 2003-04, which is the most important source of foreign exchange earning. However, it is to be mentioned here that the Orissa Mining Corporation usually follows the long-term contract for export in the international market, for which the Corporation has not been able to avail the benefit from the ever increasing international market prices, especially, of Iron ore.

2 Private and Foreign Direct Investment (FDI) in Mining Sector

In the 1980s, Orissa got the attention of the world because of starvation, death and selling of children in Kalahandi and other districts. But in the 1990s, the attention has shifted from these human stories to financial matters. Orissa has occupied an important place on the investment map of India with a long list of investment proposals, mostly during 1995-96; the state has received the largest amount of private investment in India, both foreign and domestic. According to the 11th Quarterly Survey of Projects Investment conducted by ‘Projects Today’ (http://ori.nic.in/diorissa/fdiorissa.htm), Orissa is ranked sixth in total outstanding investment in the country. As on 30th June 2003, Orissa had 205 projects worth of Rs. 112261 crore in various stages of planning and implementation. The projects owned by the private sector in the State are to the tune of 62 per cent, while that of the government is 38 per cent. The participation by the foreign companies in various projects in Orissa constitutes about one-third of the overall investment and about 54 per cent of the investment is by the private sector.

Particularly, from August 1991 to September 2003, total 139 projects in Orissa with either ‘Foreign Direct Investment’ (FDI) or ‘Foreign Technology Cases’ (FTC) have been approved by government (Table-5.15). The total cost of these projects was estimated at Rs. 155619.13 million, which consists of Rs. 82293.15 million (52.88 per cent) FDI, Rs. 65392.20 million (42.02 per cent ) private investment and merely Rs. 7933.78 million (5.10 per cent) public sector investment (Table-5.16). Around 35 per cent of the projects (49 nos.), which were approved for mining and mineral based industries, account for more than 92 per cent of the total approved project costs. The proportion of the total foreign equities and the total private investments in the mining and mineral based projects, as a whole, was 91 per cent and 93.68 per cent, respectively.

Companies like Hindalco (Birla group), Alcan (Canada), Vedanta (UK), BHP Billiton (UK), Rio Tinto (UK) etc. are entering into the State for Bauxite project. Similarly, Tisco, BHP Billiton (UK), Vedanta/ Sterlite, Posco (South Korea), Rio Tinto (UK), Bhusan, Jindal, Mittal, Essar companies are being entered into the State for Iron ore projects. All these projects would displace nearly 2.5 lakh families or 10,00,000 people (Sarengi unpublished). Recently the state government has declared a state level resettlement policy after Kalinga Nagar firing[2]. As per provision the ‘consultation’, not ‘consent’ of gramsabha is binding, but it is silent about the amendment of Orissa Gram Panchayat Act in the same light. It speaks about direct negotiation by land losers with the company, but again with certain bureaucratic procedures. It has no provision for land against land or at least job against land for land losers; also no provision for landless families and for old oustees. The provisions in the policy never deny that police force would be used in any case. The Kalinga Nagar and Maikanch[3] firing and many more of the kind may happen in future.

As mentioned earlier, Orissa has more than 98 per cent of India’s Chromite, 60 per cent of Bauxite and 24 per cent of Iron ore. No other State has such abundance of natural resources with port facilities. The multinational and private houses have no other state in India to go to other than Orissa, to set up steel, aluminium and coal-based power projects. Besides, the State is providing unusually huge subsidies to investors in different forms such as guarantees, tax concessions and investment subsidy. Moreover, the abundance of cheap labour makes it an investor-friendly state.

Besides, the economy of Orissa has always faced the problem of ‘capital flight’, as the returns of the industry and the service sectors went to other states and were not ploughed back into the State. This problem, especially, during post-reform period is further going to be accentuated as these new projects have substantial investments by multinational companies and ‘capital flight’ will not be only restricted to other states within India, but will also move out of the country. Thus, the long-term economic benefits of these investments are very much in doubt.

Moreover, new power projects in Orissa have been coming up. But Orissa is already a power surplus state in India, even though more than half of its population do not have access to electricity. However, power as a commodity that cannot be stored, has to be distributed immediately. As the present national grid system is not suited to import power from Orissa, it makes no sense to have more plants to generate extra power without being able to use it. There are adverse environmental consequences as well, which has been analysed in the following section.

3 Forest Area Diverted to Non-Forest Use

From 1947 to October 1980, total 1,99,348 hectare of forest land had been diverted for other development projects. Similarly, from December 1980 to 2004-05, total 34,264.3 hectare of forest land has been deforested for different projects such as mining, industry, irrigation, railways, etc. During 1980 and 1991, the extent of deforestation, due to the above projects (88 nos.), was around 13,733 hectare. This deforestation has increased to 17,255 hectare during 1992 and 2001 due to 150 projects. Interestingly, the percentage of deforestation due to mining, and power and transmission has been increasing over the years.

The percentage of deforestation due to mining when compared to the total projects was 11.20 per cent during 1980 an 1991, which has increased to 45.75 per cent during 1992 and 2001, and further increased to 48.94 per cent during 202-03 and 2004-05. It shows that mining alone is responsible for nearly 50 per cent of the total deforestation in the State. Besides, as on first January 1983, a total of 74,383 hectare of forest land was encroached. The extent of this encroached forest land has increased to 78,505 hectare by 2003-04 (PCCF 1981-1990; PCCF 2003-04). In turn, the devastation caused to the economy by continued and excessive deforestation is indeed enormous. Deforestation is responsible for greater frequencies and intensities of floods, soil erosion, heavy siltation of rivers, and for the frequent changes in climatic conditions. How the deforestation is affecting the life and livelihood of people is explained in the last sub-section of this section.

4 Environmental Impact of Mining in Orissa:

Mining operations frequently involve a high degree of environmental impacts, which can extend well beyond the extent of mineralised areas, depending on the nature of the operation being followed. The impacts of a mining operation commence with exploration activities, extend up through extraction and processing of minerals, and it may continue well beyond post-closure of the operation. The nature and extent of impacts vary during various stages of the project life.

Environmental degradation in Orissa, especially in the mining areas is caused by methods of mining, ore beneficiation, soil/sub-soil/slope destabilisation, pollution of water resources, air pollution, noise pollution, harm to vegetation and solid waste.

4.1 Opencast mining

The opencast mining system is mostly being followed in all the mines except in fourteen coal mines, i.e. five in Talcher coalfields and nine in Ibb valley coalfields in the State. Opencast coal mines cover 60 per cent of the total coal mining area in the State.

The opencast mining on hills has to be governed by well organised bench systems and on the plains by well planned surface trenches. The size, specifications and height/depth of the benches and trenches are to be governed by Mines Act, 1952 and Metalliferous Mines Regulations, 1961. The quarry owners rarely conform to the bench and trench specifications layed down in the Acts. Except Damanjodi and few others such as TISCO mines at Joda and the Bolani mine near Bolani, most of the mines do not have systematic quarrying procedures. One can observe the gross violation of the mines and environment related Acts[4] in these sites. Often overburden and top soil are pushed down slope damaging vegetation, altering course of streams/nalas and blocking channels due to sliding of the volumes of the materials. Besides, the lose materials are washed by rain water into the low-lying lands, are spread over croplands and add particulates and chemical implies to surface water bodies.

Moreover, trench cutting results in deforestation, loss of topsoil, surface water pollution, lowering of water table and encroachment of adjacent productive areas by dumping of tailing. This is common to all the non-hilly tracts where mining is being undertaken on the surface, e.g. Coal fields of Ibb and Talcher, Manganese areas of Banei-Keonjhar belt, Limestone belt of Biramitrapur, Graphite areas of south and west Orissa.

4.2 Underground mining

As mentioned above, fourteen coal mines are underground by operation. Talcher underground mines are spread under the Talcher and surrounding township areas over 5161.34 hectare. The normal practice laid down in mining related activities is to cut an underground trench and fill it duly. The people in Talcher live in constant fear that some day their houses and land will subside or sink creating water bodies or low land, which may displace them altogether. It addition, it has been observed after discussion that draining out of the mine water, reduction in surface soil moisture and lowering of ground water table leads to drying up of wells.

4.3 Mechanised mines and the environment

Mechanisation not only reduces the employment opportunities in the mining operation, but also creates adverse environmental impacts. It enhances speed of despoliation, causes noise pollution, and contributes a lot of dust (SPM) and auto exhaust into the atmosphere. Mechanisation also enhances the incident of fire accidents and disasters[5] and causes optical irritation.

The adverse effects of mechanised mines in the Iron ore belt at Joda and Bolani are more prominent. Anyone approaching Joda east iron mine, Bolani mines, Ibb and Talcher coalfields will be beset with dust and noise.

4.4 Air and water pollution, and climate change

The actual rainfall in mineral producing districts, especially, in the non-coastal regions has been well below the normal rainfall. Similarly, the temperature and the extent of air pollution were found to be higher in the monitoring points located in the proximity of the mining areas. It has been studied that Orissa is already emitting one per cent of the world’s green house gases. This will rise to five per cent by 2008 (Dash 2004). In addition, Orissa’s industrialisation, especially, mineral based industries will release toxic and potent global warming agents equivalent to eight million ton of carbon dioxide emission.

4.5 Impact on natural vegetation and agricultural crops

The Talcher-Anugul industrial area is one of the warmest spots in India due to high level of pollution. The soil in the area is generally loamy-sand with low nitrogen content and is slightly acidic in nature. Potassium, Phosphorus and sodium contents are high in the areas. Thorny and hardy species are more prevalent in the area as the natural soil-content is unfit for agricultural crops. Disappearance of wild and indigenous species is also an indication of environmental stress.


From the above analysis of mining operation in Orissa, the following important things can be concluded: (i) the prevailing process of mining operation gives more importance to revenue generation by neglecting its employment aspect; (ii) value addition of the minerals produced in the State need to be increased; (iii) a fixed proportion of the value of minerals produced need to be invested in physical capital, so that the State will maintain the total capital stock – natural plus physical capital; (iv) subsidy to the mine owners needs to be reduced; (v) implementation of environment and mines related Acts need to be more strict, any laxity needs to punished; (vi) project affected households need to be ensured with sustainable livelihood opportunities, which would be suitable to them; and (vii) there should be no discrimination in fixing royalty in different states in India.

[1]The coal available in Orissa is being used mostly for power generation.

[2] The police shot dead 12 tribals on January 2, 2006 at Kalinga Nagar, Orissa, who along with hundred others were protesting against the beginning of constriction work by Tata-Steel. A policeman was also killed in the clash.

[3] Three tribal people were shot and killed by police in Maikanck villahe of Rayagada district on 16th December 2000.

[4] The Mines and Minerals (Development and Regulation) Act, 1957; the Mines Act, 1952; the Mineral Conservation and Development Rules, 1988; the Environment Protection (Forest Conservation) Act, 1980 (Amended in May 1992);; the Environment Protection Act and Rules, 1986; and the Environmental Impact Assessment Notification, 1994.

[5] Disaster: where more than five people die due to fire accident.

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