Coal and Mining Sector

Should district mineral foundations be with state mining departments?


Mains Paper 2: Governance | Mechanisms, laws, institutions and Bodies constituted for the protection and betterment of the vulnerable sections.

From UPSC perspective, the following things are important:

Prelims level: DMF

Mains level: Welfare of the mining affected people


  • The Odisha government is planning to move its district mineral foundations (DMF) to its steel and mines department from the planning and convergence department.

District Mineral Foundation

  1. DMF is a trust set up as a non-profit body, in those districts affected by the mining works, to work for the interest and benefit of persons and areas affected by mining related operations.
  2. It is funded through the contributions from miners.
  3. Its manner of operation comes under the jurisdiction of the relevant State Government.
  4. The DMF were mandated through the Mines and Minerals (Development & Regulation) Amendment Act, (MMDRA) 2015.

Contributions to DMF

  1. Every holder of a mining lease or a prospecting licence-cum-mining lease shall, in addition to the royalty, pay to the DMF of the district in which their mining operations are carried on.
  2. Miners have to contribute an amount equal to 30% of the royalty payable by them to the DMFs.
  3. If the mining area is spread across several districts, the fund is shared on a pro-rata basis by these districts.
  4. DMF contribution would not be exceeding one-third of royalty and the Central Government retains the power to prescribe the rates of contribution, though DMF’s operation is under state governments.
  5. The contributions made to DMFs are collected by the State Governments and the details in this regard are not maintained centrally at the moment.

Why such move by Odisha?

  1. Odisha is the only one in India, where the planning department is the nodal authority for DMFs.
  2. Elsewhere, they are under respective mines departments, as money for them is generated from mining companies operating in affected districts.
  3. The amount is determined on the basis of the royalty that companies pay to mines departments.
  4. The plan aims to improve implementation and use of funds.
  5. Odisha has more than Rs 5,800 crore in DMFs, the most in India (total Rs 23,000 crore), owing to key mining districts such as Keonjhar, Sundargarh and Angul.

Priority areas under DMF

The various state DMF rules and the Pradhan Mantri Khanij Khestra Kalyan Yojana (PMKKKY) guidelines stipulate some “high priority” issues for DMFs, including

  • drinking water
  • health
  • women and child welfare
  • education
  • livelihood and skill development
  • welfare of aged and disabled
  • sanitation

Is the mines department, a suitable custodian?

  1. Its objectives and aims make it clear that DMFs are meant to alleviate poverty and improve human development indicators.
  2. Hence they are more aligned to state and district planning departments along with other concerned departments that overlook the high priority issues.
  3. The mining department is only concerned with the source of funds.
  4. The primary role of the mining department is in fact mineral development and not human development.

A reasonable move

  1. Placing DMFs under the state planning and convergence department is in fact a very reasonable step that Odisha had taken.
  2. Since proper planning is crucial for effective functioning of DMFs and ensuring that the money is spent well, it makes sense to place it under this department.
  3. Also convergence with certain poverty alleviation and human development schemes is important for DMFs.

Way Forward

  1. With significant financial corpus, DMFs can help improve the reach and delivery of these schemes. These include critical issues such as child nutrition, healthcare, education, livelihood, welfare of old and disabled etc.
  2. Therefore, restricting DMF to the state mining departments will only limit its scope and effective operation as well as optimal utilisation of funds.
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