Cursed with a goldmine?

If you have gold under your feet, consider yourself accursed. For there is something called the resource curse which many in this country's mineral-rich states are reeling under. It would have been a blessing had there been a way to use mineral wealth to enrich those who live on such lands.

India's mining policy asks companies to spend 3 per cent of their annual profits on local development. But this is not a law yet. Mining companies, on their part, have been doing their bit without being asked to. Tata Steel, for instance, whose activities are the most widespread in Orissa, has been running courses to equip local youths with employable skills.

Last week, the first batch of 120 students passed out of the J N Tata Technical Education Centre. The centre is situated at Gopalpur in Orissa, where people are yet to let the Tatas start any work. Half the beneficiaries of the three-year course in mechatronics are from the project site in Gopalpur. Tata Steel says it trains 600 people annually at its various project sites in Orissa alone, where it is mining iron ore.

But is charity all that the communities deserve?

The royalties charged for iron ore are peanuts, at Rs 4 to Rs 27 a tonne in states where annually, thousands of tonnes are mined and sold at Rs 10,000 a tonne abroad and at about Rs 3,000 a tonne in India.

These proceeds go to the state funds rather than to the people. It is no wonder then that Orissa, Chattisgarh and Jharkhand, where the most extensive mining activities happen, are more backward than the rest of the country. As the Centre for Science and Environment puts it, the poorest people live on the richest lands, that is, atop priceless reserves of diamonds, bauxite and iron ore.

Globally, many countries have instituted mechanisms to address this gap. Among developed countries, Alaska in the US, Alberta in Canada and Norway use established funds to take care of their oil wealth. The Alaska Permanent Fund, set up in 1976, gets 15 per cent of the oil money while the rest goes to the government. The money is invested in generating wealth for future use and also to make direct payments to each citizen through annual dividends of $ 920.

On the other hand, the Alberta Heritage Fund gets all the money but subsidises Albertans too much and invests in unproductive schemes, says a study by Carolyn Fischer, an analyst on mining.

Fischer rates the centrally managed Norwegian Petroleum Fund, set up in 1990, as the best with money flowing into a general pool to fund welfare state measures, and the surplus going to the fund. The fund has received 76 per cent of all oil revenues so far, to ensure enough funds for future governments, she says.

In Australia, the aborigines who sit on extensive mineral resources have been given their own fund to determine the use of the wealth. The money earned in royalties is transferred to the Aborigines Benefits Reserve from which portions go to local bodies in proportion to the money generated by their areas.

Countries in Latin America and Africa too have initiated similar programmes. Some have been effective, some not.

The US has liability funds like the Federal Petroleum Trust Fund to ensure that the polluter pays. These funds collect excise taxes in a kind of insurance scheme to cover environmental damage that is perpetrated by companies. Some funds float bonds which are forfeited if the company shirks cleanup responsibilities.

The Extractive Industries Transparency Initiative, a coalition of governments, companies, civil society groups, investors and international organisations, is a global initiative to promote transparency in the use of money from mining. Sponsored by the UK Department for International Development and the World Bank, the initiative has 24 members. India is not one of them.