Criticising the government’s Mining Bill, FICCI has said that the proposed legislation would adversely impact investments in the sector.
It also termed the government’s scheme to provide shareholdings to tribals in mining projects as flawed.
In a recent letter to Finance Minister Pranab Mukherjee, FICCI Secretary General Amit Mitra said that the proposed act will “adversely affect the industry”.
“...the latest draft of the Mines and Minerals Development and Regulation Act 2010 proposes measures... that will adversely affect the industry and its viability and thus deter the flow of investments into the sector,” Mr. Mitra said.
On the scheme of giving 26 per cent equity or annuity to locals and tribals affected by the mining project, the industry body said that the proposal was “complex” and “difficult” to implement.
Elaborating on the issue, it said that persons with vested interests may buy the shareholdings of tribals/local people and eventually gain control over the company.
“It is mandatory for a listed company to have 25 per cent float in the market. If 26 per cent-out of the balance 75 per cent-is allotted as compensation, the promoter will become vulnerable to hostile takeovers,” Mr. Mitra said.
It also said that investments in the sector would take a hit as “no shareholders would like to invest where 26 per cent of the shareholders do not make any contribution to the company“.
The scheme would also lead to social and economic inequality as the people affected by the projects will derive benefits, while the rest of the population will not get any, he added.
Last week, Prime Minister Manmohan Singh had said that the rights of tribals to forests must be protected.
“Development schemes have not worked well in...the areas inhabited by the adivasi population. We must make a concerted effort to bridge the development deficit in these backward areas and reduce whatever sense of alienation that may exist among the adivasis,” Mr. Singh had said.
As an alternative to the scheme of giving equity, Mr. Mitra suggested that the government should consider giving one-time fixed compensation to the locals. In the Bill, the Mines Ministry had proposed to make affected tribal families shareholders in the projects, a policy that aimed to help uplift them.
Besides this, Mr. Mitra opposed provisions like competitive bidding of mining blocks, central and State cess, and high security deposit for land - fixed at Rs 1 lakh per hectare.
The Central Government is working on the new mining legislation, which is currently being reviewed by a 10-member Group of Ministers, to make mining allocation expeditious and transparent.