DMF rules notified by Odisha Government will bring limited benefit to mining-affected communities, says CSE

  • CSE analysis shows management of DMF funds is bureaucrat-driven with minimal participation of affected communities in decision-making bodies

  • Conflict of interest in the institutional design will disable checks and balances

  • DMF Rules have been finalized without inviting public review

  • Clear purpose and use of DMF funds not identified, making these open to misuse; Rules have listed activities which are being funded through other sources 

NEW DELHI, August 24: Centre for Science and Environment (CSE) said on Monday that the notified Rules released by the Odisha Department of Steel and Mines, will not fulfill the objective for which the District Mineral Foundation (DMF) was instituted. The DMF rules were notified by Government of Odisha on August 18 in accordance to the requirements of the Mines and Minerals (Development and Regulation) Amendment (MMDR) Act, 2015.

“The Odisha DMF Rules, in many ways, therefore, frustrate the objective with which the Central Government has instituted the DMF, which is clear in letter and spirit of the law.  Strictly adhering to the fulfillment of such objective should have been central to framing of the DMF Rules,” said CSE Deputy Director General, Chandra Bhushan.

While analyzing the rules, CSE said that the Odisha DMF Rules were lacking in several key aspects, including:

  • Poor representation of affected communities in the decision-making body,

  • No voice of people in deciding where and how DMF money should be used,

  • Conflict of interest in institutional design, and 

  • A huge scope for misutilisation of funds. 

“Certain provisions of the Rules apparently intend to benefit the persons and areas affected by mining-related operations, but with such inherent problems it might actually end up hurting the interest of the poor communities in these areas,” said Bhushan. 

CSE is also disappointed by the manner in which the Rules have been notified. The Rules which are actually meant to “work for the interest and benefit of persons” in mining-affected areas, have been notified without public consultation or offering opportunities of public review before being finalized. 

The Rules fail to make the DMF an institution ‘of the people’- 

CSE’s analysis shows the institutional design proposed for the DMF leaves little scope for people’s involvement. The composition of the Board of Trustees and the Executive Committee shows clear leaning towards a bureaucrat-driven institution. There is very little representation of people from areas that are actually affected by mining except for the Panchayati Raj or Urban Local Body representatives as mentioned. However, in such cases, too, the representation has been restricted to a maximum of three.

Bhushan said, “The structure has the District Collector (DC) both in the Board of Trustees as well as the Executive Committee. Having the DC in both bodies will create a conflict of interest. In all likelihood, the actions of the Executive Committee will be accepted and passed on by the Board of Trustees.”

A primary purpose of having a two-tier institution is to have checks and balances in the governance mechanism. Therefore, the Board – which largely has an overseer role – should be more neutral and must have separate representations from the Executive Committee for taking objective decisions on matters it is entrusted with.

Rules create ambiguity and leave loopholes in use of DMF funds

While the Rules mention that the “proceeds of the fund shall be utilized only for direct benefit of the persons living in or for physical works within the areas” affected by mining operations – Rule11(2) –exceptions have been made which can essentially ‘justify’ the use of such funds for various other purposes. Two points are particularly noteworthy:

• The Rules say that up to 40 per cent of the funds may be utilised for “development of common infrastructure at the block or district level institutions” to “directly or indirectly” benefit the persons living in the mining-affected areas; 

• The Board may take up projects for development of common infrastructure like construction of roads, bridges, etc. which are of importance to the district in any excess amount from the 40 per cent limit on a case-to-case basis.

“Both these exceptions can lead to a huge misuse of funds,” said Bhushan. For example, in a particular mining district like Sundergarh, a district-level institution will include departments or agencies related to education, health, social welfare, rural development, water resources, agriculture, etc. All of these departments or agencies in some way have to do with the development of such areas. Therefore, one can essentially use DMF money to build or upgrade a building of such departments, or use it for procurement for other such materials on the pretext of “development of infrastructure” for people’s good.

“Moreover, DMF money should not be used for construction of roads, bridges and similar projects,” said Bhushan. Such big-ticket infrastructure projects should actually be taken care of by contribution from the state coffer that a district/block/village should normally receive. If the DMF fund is to be utilized for such needs, it should be used as an “add on”.  For such developmental purposes, there should be transparent mechanisms in place to transfer DMF funds to other concerned government departments that can implement and maintain these assets. 

The various provisions about ‘investments’ as loosely prescribed in DMF Rules also creates scope for misuse of these funds. This will delay or stop the benefit flow for the right cause, believes CSE.

Clear identification or activities and purposes desirable

“Instead of creating the ambiguities and loopholes, what the Odisha Government should have done was identify activities/purposes clearly that would clearly benefit the people and areas affected by mining and which are verifiable. The respective percentage of funds for all such purposes must have also been clearly earmarked,” said Bhushan.

What’s additionally problematic is that the Rules have listed activities to be undertaken using DMF money which actually fall under the ambit of other schemes instituted by the Government. This is particularly the case with suggesting that DMF money can be used for afforestation purposes, as mentioned in Rule 10(c). “It is completely unacceptable that DMF money should be used for afforestation. We already have the Compensatory Afforestation Fund Management and Planning Authority (CAMPA) in place for such a purpose,” said Ajay Saxena, Programme Manager, CSE. The State Government should make efforts to implement CAMPA in a transparent manner and use the money effectively, which is now a matter of huge controversy as revealed by the CAG Report on CAMPA in 2013, adds Saxena. 

Identification of beneficiaries and developmental schemes/works poorly done

While the Rules to a certain extent outline how beneficiaries and developmental schemes/works will be identified in Scheduled Areas in Odisha, how this would happen for non-scheduled areas is completely unclear. This is important given the fact that a significant amount of mining happens outside scheduled areas in Odisha.

Even in the case of Scheduled Areas, the way development plans are conceptualized and implemented is problematic. As suggested, the planning will be done by the members of the DMF, essentially bureaucrats, and the Gram Sabhas will only be consulted during approval.  “This makes it a top-down approach, which goes against the spirit of DMF and will lead to inappropriate use of DMF funds,” said Bhushan.

“There is no doubt about the under-development and abject poverty that India’s mining districts suffer from,” said Bhushan. He recalled the Prime Minister’s Independence Day address to the nation which acknowledged this grim fact. “As the Prime Minister observed, ‘the people who sweat to make our country rich’ are left under-developed and poor. The picture is probably the starkest in Odisha which where nearly 40 per cent of the population lives below the poverty line.  The situation is worse for tribals as more than 75 per cent of the rural tribal population lives below the poverty line. The Planning Commission has identified 27 districts in the state as backward. “The DMF was an opportunity to improve the situation, if not reverse it. The Rules in their present form leave little hope for that,” said Bhushan. 

For further information, please contact Anupam Srivastava,, 99100 93893


Media Clippings
Old problems mar a new solution

The Hindu, September 11, 2015

Odisha rules not transparent, to bring only limited benefit

The Pioneer (Bhubaneswar edition), August 30, 2015