Your mines and ours

As in India, exploitation of mineral resources in Pakistan is complicated, out of control via ownership, policy issue.

The federal government of Pakistan seems to have found consensus earlier this month on its new national mineral policy, overcoming misgivings of some provincial government. The approval by Pakistan’s Council of Common Interests will eventually enable allocation of mineral leases to private investors. It could be useful, perhaps, to learn from the Indian experience in this regard.

The story of mining involves a larger part of the population than just miners, exporters and metal manufacturers. An ongoing investigation by the Justice MB Shah Commission of Inquiry, set up by the Indian government in November 2010 to look into widespread illegal mining, has already confirmed in its interim reports what had been commonly feared and reported. Its summary interim report begins thus: “There is enormous and large-scale, multi-state illegal mining of iron ore and manganese ore running into billions every year, having several pernicious evil effects on the national economy, good governance, public functionaries, bureaucracy, public order, law and order. It has encouraged huge corruption at all different levels in public life, mafia in society and money power. It is not only national loot but also has deleterious effects on the national economy and society. This has to be stopped immediately and effectively.”

Several state (provincial) governments in India, including Goa, Karnataka and Odisha, have come under pressure to prevent illegal iron ore extraction and exports. An agency report noted that “India’s efforts to clamp down on illegal mining have handed a $15 billion lifeline to global iron ore giants.” The mining and manufacturing industries see this as India’s loss but there is another way of looking at it. The Shah Commission report in September estimated that Goa alone could have lost close to Rs350 billion in official revenues due to illegal practices. The immediate ban on mining in Goa has followed the example of neighbouring Karnataka, also under a similar investigation, and the Shah Commission has now turned its attention on another mineral-rich state, Odisha.

Pakistan’s new mineral policy declares: “Our vision for Pakistan’s mineral sector is of a strong, vibrant, and sustainable private sector-driven mining industry, contributing significantly to our economic development.” This possibly entails foreign investment and the nation’s provinces are naturally wary. Indeed, more than a few conspiracy theories in Pakistan seem to be built around the possible foreign interests in the mineral resources of west Pakistan. As in India, the exploitation of most mineral resources in Pakistan is complicated by ownership and policy issues.

The boom in Indian mining started with a similar national mineral policy that encouraged the participation of private players and was fuelled by the explosive growth in the Chinese demand for ore ahead of the Beijing Olympic Games. The mineral-rich states pushed for export-oriented mining and set aside large areas owned by state entities for exploitation by private players. Iron ore prices had one time jumped more than five-fold, from around Rs1,300 a metric tonne to over Rs6,000 but royalties fixed by the Union government averaged at about Rs20 a tonne. A more reasonable regime of royalties was introduced in August 2009 but by then, private greed had done the damage. The Shah Commission noted that in some instances, ore prices “have gone up by about 20 times without any corresponding benefit and increase to the public exchequer.”

Mineral areas, unfortunately, are naturally laid over by rich forests and biodiversity zones in India. They are also in the poorest regions of India. Private mining companies have transgressed beyond their officially leased areas into the forests, polluted precious water sources and criminalised the local administration with bribes and threats. The populations around the mining areas have been severely impacted. A Human Rights Watch report in June this year said official negligence by the governments at the Union and the states had led to rampant mining that could have have damaged “the health, water, environment and livelihoods of these communities.” But the mining tycoons have simply become richer.

Published in The Express Tribune, November 30^th, 2012.