Billions in welfare kitty, yet India’s mining villages stay buried in poverty

In India’s mineral-rich regions, special funds have been set up to improve the lives of poor communities affected by mining — but villagers and politicians say the money is going elsewhere.

village council member poses for a picture near mine
Village council member N H Malliaswamy poses for a picture near an open cast mine in Sandur, India. Image: Anuradha Nagaraj/Thomson Reuters Foundation

When N H Malliswamy first heard about a fund to improve the lives of people affected by mining, he wondered why his village in an iron-ore extraction hub in Karnataka had never benefited.

For the past year, the ex-employee of a mining firm, which was shut down for illegal operations, has tried to trace the millions of rupees paid by companies annually into this kitty, known as a district mineral fund.

“The soles of my slippers have frayed trying to get details on the spending of these funds,” Malliswamy, 45, told the Thomson Reuters Foundation, sitting outside the primary school near his home in Deogiri village in Sandur.

“Slowly I have begun to understand the reason why these funds were created and how they are either being misused or not used at all. All this money can turn our lives around.”

In 2015, the Indian government made it mandatory for mining lease holders to contribute 10-30 per cent of their royalties to funds set up in areas affected by mining-related operations — from iron ore to coal, quartz, mica and granite.

India has the world’s fourth largest coal reserves and is its fourth-biggest producer of iron ore, the key material in steel-making.

Growth in infrastructure development and rising demand for electric power is expected to boost mining in India after the Covid-19 pandemic, with more mines likely to be licensed.

The District Mineral Foundations (DMFs), which have been set up in 600 districts across 21 Indian states, contained more than 500 billion Indian rupees ($6.8 billion) as of July, according to mining ministry data.

The law requires the money to be spent on “high priority” social goals like healthcare, education, child development and improving sustainable livelihoods in places impacted by mining.

But data shows that only half the funds have been spent and about half the planned projects completed so far.

Human rights campaigners said the 2015 law recognised the right of local people to benefit from natural resources for the first time in a country where many mineral-rich regions are also among the poorest and most under-developed.

“(The) DMF (model) is India’s tool for just transition,” said Bhanumati Kalluri of the Dhaatri Resource Centre, which works with women in mining areas and advocates more spending on their health and nutrition.

“However, there is a huge discrepancy in the aim of setting up these funds and how they are spent. The spending is ad hoc and often not in core mining areas. The beneficiaries are not always those who are affected and need change the most.”

‘Healthcare not hockey’

There have been frequent protests in mining districts over the past year, with rights campaigners and elected representatives calling out what they say is rampant misuse of the funds.

Laxman Munda, a lawmaker in the eastern mining state of Odisha, has raised in the state assembly “diversion of funds” for building a sports stadium two hours from an iron-ore hub.

The lawmaker from Bonai said “so much money” is being made from mining in his state but that has not translated into progress for residents.

“There is no proper road connectivity and a good hospital is 80 km (50 miles) away. People just die on the way. It is obvious we need healthcare and not hockey fields,” he said in a phone interview.

Kalluri said a large share of the funds had been spent in parts of mining districts unaffected by the industry, including on air-strips, supplying electricity to an airport, constructing colleges and upgrading urban infrastructure.

During the Covid-19 pandemic, there were also protests in western Goa state as DMF money was spent on coronavirus relief, with most of the equipment purchased and infrastructure built going to benefit hospitals in cities.

Government data, however, shows that the DMFs have allocated about 40 per cent of their spending to a “priority category” of improving drinking water facilities.

That includes setting up water purifying plants and providing water tankers to villages where water is often polluted due to mining activities.

But in Sandur, part of mineral-rich Ballari district, locals said most water purification plants, which can be accessed after paying a user fee of 2 rupees, were not functioning.

Pavan Kumar Malapati, Ballari’s administrative head, pointed to a shortage of technical expertise and manpower to ensure maintenance of the water purifiers.

But efforts are being made to resolve the issue, he said, with a three-year action plan in place and consultants hired.

Lack of transparency 

In July, the federal government warned states not to divert the funds out of mineral districts or into other programmes.

Vivek Kumar Sharma, director in the union ministry of mines, which oversees the funds, said review meetings were held regularly.

“The objectives are very clear and the focus is on the people,” he said, noting that at least 60 per cent of the funds must be spent on improving local lives.

A 2018 status report on the DMFs by the New Delhi-based Centre for Science and Environment suggested the reality on the ground was different.

It highlighted how the DMFs had not identified their beneficiaries clearly, often limiting themselves to those living in the immediate vicinity of mines.

They often left out people displaced by mining and others who have lost their livelihoods because of it, including in forests, the report said.

Neither had there been any investment in improving child nutrition and under-five mortality rates, a big problem in most mining districts especially with large tribal populations, it noted.

Report co-author Srestha Banerjee said little had changed since 2018.

“Mining has been increasing — the money coming in is huge but there are no plans for how to spend it… Nobody really knows what is happening,” she said.

Instructions are not standardised and state websites on spending are not updated, she added.

Low awareness

College student N Parshuram, 22, belongs to a youth club that travels around Sandur’s “mining colonies” educating people about the DMF and their rights.

“All our families are linked to the mines. Some club members also work as drivers for mining companies,” he said. “We live in shanties where water, power and health are real challenges. If this money is meant for us, we want to make sure we get it.”

In Deogiri, Malliswamy was elected in December to the village council, which plays a key role in steering the DMF.

Pointing to the lack of transport, polluted open wells and the slushy road leading up the hill, he said few people here know about the funds and participation in spending decisions is low.

Government officials assume that mining companies will tackle local problems as part of their corporate social responsibility work in affected communities, he said.

“And companies do the bare minimum. I think we will have to get more involved and demand our rights,” he added.

This story was published with permission from Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, climate change, resilience, women’s rights, trafficking and property rights. Visit

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