District Mineral Foundations: Structural Concerns and Policy Recommendations

SETU: Centre for Social Knowledge and Action

India’s mineral resources are vast. It ranks third in the world in production of coal, fourth for iron ore, fifth for crude steel, and eighth for aluminum. Yet the benefits and harms from these resources are not evenly distributed. Mining-affected communities disproportionately bear the costs of mining, leading to an elevated risk of local conflict. In response, the Government of India has required that every mining district create District Mineral Foundations (DMFs), to distribute some of the revenue from mining to these communities.

The DMF is today moving from policy to implementation at the local level. We thus researched the governance dimension of DMF implementation – in particular, how local politics is shaping the expenditure that should benefit affected communities. Based on interviews with dozens of local community members, politicians, and mining company actors, we found that, while the DMF was envisaged as a participatory mechanism for affected communities to determine how funds should be spent, the reality was one of capture by local politicians, as well as a remarkable volume of unspent DMF funds.

In particular we identified five major governance challenges: (i) how to identify the affected community, (ii) how to formalize and administer the DMF, (iii) how to ensure affected community participation in the governance of the DMF, (iv) how to ensure affected community participation in fund collection and expenditure, and (v) how to audit the DMF. We offer some lessons for policymakers, based in particular on interviews with community members: to promote DMF awareness, develop participatory mechanisms, combat disenchantment and bad perceptions of the DMF, ensure fund utilization, and develop robust governance frameworks for the DMF.

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