Why mineral rich districts stay poor: On the District Mineral Foundation Trust

Why in the News

Jharkhand holds nearly 40% of India’s mineral wealth, yet many of its mining districts remain among the least developed. The gap exposes the failure of the District Mineral Foundation Trust (DMFT) to channel mining revenue to affected communities.

What is the District Mineral Foundation Trust (DMFT)?

1. Origin: The DMFT is a trust established in 2015 in every district affected by mining to reinvest a share of mining revenue in local welfare.
2. Statutory backing: Formulated under Section 9B of the Mines and Minerals (Development and Regulation) Act, 1957 (amended in 2015).
3. Rationale: It was set up because mining affected communities bear the greatest social and environmental costs of extraction but receive the least share of its benefits.
4. Funding: It is financed by contributions that mine lease holders pay as a proportion of royalty.

Why do mineral rich districts stay poor?

1. Auction delay: Jharkhand delayed auctions after leases expired, while Odisha auctioned promptly.
2. Production stagnation: Delayed auctions cut production, which stayed near 23 million tonnes in Jharkhand.
3. Royalty shortfall: Lower production means lower royalty collections.
4. Fund starvation: Lower royalties translate into reduced DMFT contributions, so affected villages receive fewer resources.
5. Spillover decline: As mines shut and leases expired, transport operators, eateries and shops lost business and youth migrated for work.

How do Jharkhand and Odisha compare?

1. Auctions: Since 2019-20 India auctioned 434 mineral blocks, Odisha 45 and Jharkhand only three, despite Jharkhand being the richest mineral bearing state.
2. Production: Between 2018-19 and 2024-25 Odisha’s iron ore output rose from about 120 to nearly 180 million tonnes, while Jharkhand stayed near 23 million tonnes.
3. Revenue: In 2025-26 Odisha earned nearly Rs 46,000 crore in mining revenue against Jharkhand’s Rs 22,000 crore, though its deposits are less than half of Jharkhand’s.
4. DMFT accumulation: Nearly Rs 3,700 crore accumulated under West Singhbhum’s DMFT between 2016 and 2026 with little visible welfare gain.

Why has the money not reached communities?

1. Missing disclosures: DMFT Rules require every district to publish annual reports, budgets, approved works and beneficiary details.
2. Opaque records: Across Jharkhand these disclosures are missing, outdated or inaccessible.
3. Accountability gap: Communities have little means of knowing how thousands of crores collected in their name were spent.

What are the challenges to the DMFT?

1. Transparency deficit: Poor disclosure prevents communities from tracking fund use.
2. Governance and political will: Delayed auctions reflect weak administrative resolve to run the mining economy.
3. Fund underutilisation: Accumulated funds often stay unspent or are diverted to works unrelated to affected people.
4. Elite capture: Weak beneficiary identification lets benefits bypass the poorest households.
5. Cyclical dependence: Fund inflows fall whenever production and royalties decline, starving welfare when it is most needed.
6. Weak grievance redress: Affected communities lack a clear channel to question spending decisions.

Conclusion

The DMFT debate is about restoring trust, not merely accounting. Before announcing new investment summits, Jharkhand must first show it can manage the mineral resources and welfare funds it already possesses.

Back2Basics: District Mineral Foundation (DMF)

1. Basis: established under the Mines and Minerals (Development and Regulation) Amendment Act, 2015.
2. Nature: a statutory non profit trust in every mining affected district.
3. Funding: contributions from mine lease holders as a percentage of royalty.
4. Fund use: implemented through the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) for welfare of mining affected people.
5. Objective: to work for the interest and benefit of persons and areas affected by mining.

PYQ Relevance

[2016] What is/are the purpose/purposes of ‘District Mineral Foundations’ in India?
1. Promoting mineral exploration activities in mineral-rich districts
2. Protecting the interests of the persons affected by mining operations
3. Authorizing State Governments to issue licenses for mineral exploration
(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer: (b)