According to HRW, the environment impact assessment reports submitted by iron ore mining companies in India are “full of false data” and they should be reviewed
The scale of lawlessness that prevails in India's mining sector has gone out of control due to a dangerous mix of bad policies, weak institutions, and corruption, government oversight and regulation, says Human Rights Watch (HRW), an international organisation, in its latest report on Indian mining.
"India's mining industry is an increasingly important part of the economy, employing hundreds of thousands of people and contributing to broader economic growth. But mining can be extraordinarily harmful and destructive if not properly regulated-as underscored by a long list of abuses and disasters around the world," the HRW said.
The mining sector in India face a myriad of problems including the widespread "illegal mining" issue. Official statistics indicate that there were more than 82,000 instances of illegal mining in 2010 alone-an annual rate of 30 criminal acts for every legitimate mining operation in the country.
International law obliges the Indian government to protect the human rights of its citizens from abuses by mining firms and other companies. India has laws on the books that are designed to do just that, but some are so poorly designed that they seem set up to fail. Others have been largely neutralized by shoddy implementation and enforcement or by corruption involving elected officials or civil servants. The result is that key government watchdogs stand by as spectators while out-of-control mining operations threaten the health, livelihoods and environments of entire communities. In some cases public institutions have also been cheated out of vast revenues that could have been put towards bolstering governments' inadequate provision of health, education, and other basic services, the report said.
In the iron mining areas of Goa and Karnataka visited by Human Rights Watch, residents alleged that reckless mine operators had destroyed or contaminated water sources they depend on for drinking water and irrigation. In some cases, miners have illegally heaped waste rock and other mine waste near the banks of streams and rivers, leaving it to be washed into local water supplies or agricultural fields during the monsoon rains. This can render water sources unsafe and decrease agricultural fertility. Rather than seek to mitigate any damage, some mine operators puncture the local water table and then simply discard the vast torrents of water that escape-permanently destroying a resource that whole communities rely on.
In some communities visited by Human Rights Watch, farmers had complained that endless streams of overloaded ore trucks passing along narrow village roads had left their crops coated in thick layers of metallic dust, destroying them and threatening economic ruin.
Human Rights Watch said it witnessed lines of heavily-laden mining trucks several kilometres long grinding along narrow, broken roads and leaving vast clouds of dust in their wake. Some residents pointed to the same metallic dust coating their homes and even local schoolhouses, and worried about the potential for serious respiratory ailments and other health impacts that scientific studies have associated with exposure to mine-related pollution. In some of these communities, people have suffered intimidation or violence for speaking out about these problems. All of these allegations echo common complaints about mining operations across many parts of India, the report said.
According to HRW, some of India's mining woes have their roots in patterns of corruption or other criminality. For instance, this report describes how mining magnate Janardhana Reddy allegedly used his ministerial position in the state government of Karnataka to extort huge quantities of iron ore from other mine operators-using government regulators as part of his scheme. The evidence shows that state government agencies in Karnataka alone may have been cheated out of crores of rupees in revenues-depriving the state of funds that could have been put towards the improvement of the state's dismal health care and education systems, it said.
As lurid as some of India's mining-related corruption scandals have been, Human Rights Watch said it believes that the more widespread problem is government indifference. Even in Karnataka, ineffectual regulation played a key role in allowing criminality to pervade the state's mining sector. And many of the alleged human rights abuses result not from patterns of corruption or criminality but from the government's more mundane failure to effectively monitor, let alone police, the human rights impacts of mining operations. Many public officials openly admit that they have no idea how prevalent or how serious the problems are. In effect, India's government often leaves companies to regulate themselves-a formula that has consistently proven disastrous in India and around the world, the report added.
All of this uncertainty is part of the problem-in far too many cases, government regulators fail to determine whether companies are behaving legally or responsibly, or whether they are causing harm to their neighbours.
According to the report, Goa encapsulates all of these problems. "… (Goa) state government regulators there admit they have no real idea whether individual mining firms are complying with the law, and the evidence shows that many are not. Activists and even the current chief minister allege widespread illegalities and, surprisingly, local mining industry officials do not deny such allegations," it said.
One company executive interviewed by Human Rights Watch spoke of "chaos and corruption" and a "total lack of governance" in the state's mining sector. A spokesperson for the Goan mining industry estimated that nearly half of all mining in the state violates various laws and regulations.
The problems in Goa reflect nationwide failures of governance in the mining sector, the report said. From initial approval to ongoing oversight, the mechanisms in place to regulate and oversee India's mining industry simply do not work, said HRW in the report.
Coming down heavily on the ministry of environment and forests (MoEF), the HRW said, the environmental clearance regime is explicitly empowered to consider impacts on local communities and their rights, not just environmental issues, but the process is hopelessly dysfunctional.
"Often, clearances are granted or denied almost entirely on the strength of Environmental Impact Assessment (EIA) reports commissioned and paid for by the very companies seeking permission to mine. By design, the reports give short shrift to the issue of human rights and other community impacts, focusing on purely environmental concerns. Many do not even explicitly mention the responsibilities of mining firms to respect the human rights of affected communities. Some companies treat mandatory public consultations around the reports as an irritating bureaucratic hurdle rather than an important safeguard for affected communities," HRW said.
It accuses that there is considerable evidence that that these crucial EIA reports are often extremely inaccurate, are deliberately falsified, or both. In some cases, reports incorrectly state that issues of potential regulatory concern-the presence of rivers or springs, for instance-simply do not exist. Sometimes important conclusions are simply cut and pasted from one report to the next by authors who appear to assume that regulators will not bother to read what they have written.
In one the most notorious example of this phenomenon, a mine in Maharashtra received clearance to proceed even though its EIA report contained large amounts of data taken verbatim from a similar report prepared for a bauxite mine in Russia. Officials' failure to detect such blatant falsification is emblematic of the broader absence of meaningful government oversight, the report said.
Unsurprisingly, under this framework, mining projects are almost never denied environmental clearance. And once a mine is operational it experiences comparably lax government oversight of its actual compliance with the terms of those clearances. A few dozen officials across India are responsible for monitoring thousands of mines and other projects nationwide and are rarely able to make site visits to any of them. Instead, they rely almost entirely on compliance reports provided by mining companies themselves.
Human Rights Watch said it believes that fixing the environmental clearance regime and other processes linked to the MoEF are among the most promising immediate and concrete steps the central government could take to safeguard the human rights of mining-affected communities.
Increasingly, the chaos in India's mining sector has deep political and economic implications. In 2011, scandals rooted in public revelations about corruption and abuse in the mining sector overtook the state governments in both Karnataka and Goa. Karnataka's chief minister was forced to resign and much of the state's mining industry was effectively shut down by a belated government crackdown, at vast economic cost. In March 2012, Goa's state government was voted out of office partly due to rising public anger about scandals plaguing that state's mining industry.
The human rights organisation said the Indian government should not succumb to the temptation to treat the problems in Goa and Karnataka as isolated issues. Both states' mining debacles reflect nationwide problems that need to be treated as such. Underscoring that point, in early 2012 potentially explosive investigations into the mining industry was underway in Jharkhand and Orissa, it added.
While admitting that the chaos in India's mining industry has some of its roots in much broader patterns of corruption and poor governance that are not easily solved, the HRW reports said there are pragmatic steps the Indian government could take to repair some of the most glaring regulatory failures.
The insurance giant wants the regulator to ease rules so that it can aggressively play with public money despite poor transparency and disclosure
Insurance giant, Life Insurance Corporation of India (LIC) wants to participate in equities more aggressively, by ‘trading’ Indian public money and has asked the regulator Insurance Regulation Development Authority (IRDA) to ease rules and make an exception, only for itself, to the equity exposure rule which caps equity holdings to a single company up to a limit of 10%.
In an Economic Times interview, DK Mehrotra, the chairman of LIC, said, “Companies where we are reaching 10% or are beyond 10%, we cannot trade in them, not even for booking profit. If I trade, as per the regulation, I cannot go above 10% again. That is preventing me from booking profits in good scrips.” Further, the chairman said, “We have suggested to the regulator to allow us to grandfather whatever investment we had till 2008. Beyond that I should be given an opportunity, which I can use as trading portfolio.”
LIC’s equity portfolio consists of many blue-chip stocks but also a host of public sector companies as well as dubious investments in beleaguered private companies in the aviation, power generation, infrastructure sectors, which are seeking restructuring of their loans even as their share prices have sagged. The exact details of LIC’s investments are not known but given the way capital-intensive stocks that populate LIC’s portfolio have performed so far, LIC has not been doing too well with its equity investments. For a bunch of laidback public sectors babus whose jobs are rotated from PR to business to HR and so on and end with a peaceful retirement, to be able to trading in and out of the market seems a bit far-fetched.
While we don’t how LIC has been negotiating the equity market, we have some clue—it performance as a fund manager of a mutual fund—LIC Mutual Fund (now LIC Nomura). The performance, by a separate team of stock experts, has simply been pathetic. In our cover story, Best Fund Houses (issue dated: 31 May 2012 http://moneylife.in/article/best-fund-houses/26233.html), the fund house was at the bottom of the list in all category of funds. Astoundingly, all of its three equity-diversified schemes failed to beat the benchmark in any of the 12 five-year monthly rolling periods ended 31 March 2012! The schemes underperformed the benchmark by an average of 3.31 percentage points.
Most alarmingly, the fund management has failed even at passive investing. In the same period mentioned above, the index schemes underperformed their benchmark index by an average of 3.12 percentage points. Out of all its schemes, the LIC Nomura Infrastructure Fund has been the worst performing in the last one year. Launched in March 2008, the scheme has given a return of -16.38% for the 1-year period ended 12 June 2012.
LIC hasn’t been the most transparent company, in terms of disclosure. Very little is known to its equity portfolio structure. Since the bulk of the money that LIC wants to ‘trade’ with comes from the Indian public, especially from semi-urban and rural areas where LIC is seen as equivalent to government. Therefore disclosure is paramount, so they know where their money is parked. Its balance sheet was a whopping Rs12.82 lakh crore as of public money last year, which could be deemed “too big too fail”, especially if it is seeking to invest in risky instruments. The insurance giant’s portfolio value is around Rs60,000 crore.
Recently, LIC had been in the limelight for its heavy investment in public sector companies; for instance Oil and Natural Gas Corporation (ONGC), where it scooped up over 84% of the PSU exploration and refining major’s shares in the latter’s recent offer. Also, its exposure to ONGC as part of its total portfolio is more than a third. The value of the ONGC portfolio was supposedly Rs21,752.91 crore on 31 March 2012. The price of ONGC has been flat since, and its investment in the company is barely above the water.
If LIC insists that it be given an exception to invest in excess of 10% and trade, it will need to make big disclosures and be a lot more transparent with the Indian public—all the time—not just for the public’s good but for its own as well.
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