GOA FOUNDATION CRITICISES APPLICATIONS OF VEDANTA AND OTHER MINING COMPANIES IN THE SUPREME COURT AGAINST THE GOA IRON ORE PERMANENT FUND
- The Supreme Court, tomorrow (15 December, 2015) will hear applications from 5 mining companies against the continuance of the Goa Iron ore Permanent Fund.
- There are at the present, 5 IAs which have been filed by 5 mining companies challenging the set up of the Goa Iron Ore Permanent Fund on various grounds.
- These applications have been filed by Vedanta, Fomento, G.N. Aggarwal, Geetabhai Parulekar and Prafulla Hede. Prafulla Hede mine is located in 1 km zone from Mollem Wildlife Sanctuary and the lease has not been renewed.
- Vedanta’s application (I.A. No 87) seeks a “clarification” of the Goa Foundation judgement dated 21.4.2014 which required all mining companies to deposit 10% of sale value of ores extracted and sold by them in a special Goan Iron Ore Permanent Fund for the benefit of future generations. The application tells the Court that when the Court passed its judgement in the 1Goa Foundation case, admikttedly there was no provision for raising money from miners to compensate for environmental damage and harm to village communities. However, after the Mines Act was amended in 2015, there is now a provision for setting up District Mineral Foundations in each mining district. Hence there is no further need for the Permanent Fund and in any case, this would be an instance of “double taxation”.
- IAs filed by G.N. Aggarwal and Fomento challenge the idea of the Permanent Fund, claiming the issue of a Permanent Fund did not find a place during the hearings that led to judgement dated 21.4.2014 and therefore they were not heard in the matter. They also state that the international price of iron ore has dropped and therefore payments to the Permanent Fund would make mining unviable. Geetabhai Parulekar and Prafulla Hede want their mining activity to be governed by the amended MMDR Act, 1957, in terms of the District Mineral Fund (and not the Goa Permanent Fund).
- The Vedanta application sets out a willful confusion between the nature of a Permanent Fund (set up under the judgement dated 21.4.2014) and the nature of the District Mineral Fund (DMF) set up under Section 9A of the amended MMDR Act, 1957. The two are different agencies, addressing different aspects of sustainability and Intergenerational Equity.
- The nature of the DMF can be described succinctly in the following terms:
a) DMF would provide for the expenditures related to rehabilitation of environment caused by mining activity. This would also include harm to affected village communities in which the activity is being carried out. Scope of DMF operations is the district. 2b) The DMF is therefore a spending fund: money deposited in the Fund is to be spent on activities covered under the amendment. Therefore, the DMF would be in the form of a non-profit trust.
- The nature of the Permanent Fund is the very opposite, and can be described succintly in the following terms:
a) The PF would deal with the requirement of meeting the demands of intergenerational equity, that is, the interests of future generations, not only the present. Therefore, by definition, it would be a fund that would save, not spend. b) Principal activity of the fund would be protection against inflation, investment in activities that would create durable assets in the long term, etc. PF area would be the entire state. In contrast with the DMF, the Fund would be a profit making activity. Fund managers must ensure intelligent investments to ensure economic yields, in order to maintain the original value of the fund. The public exchequer would benefit only when there is a surplus after adjusting for inflation.
- The Expert Committee of the Supreme Court, in fact, has said that the idea of the Goan Iron Ore Permanent Fund should now be applied in all states where such mining is taking place.
- According to the Goa Foundation, Vedanta should be the last person to file this application. It is well established that the Applicant Vedanta benefitted well beyond any reasonable measure from iron ore extraction belonging to the present and future generations of people living in Goa.
The largesse garnered by the company in the past 8 years of mining is simply staggering. Based on the applicant’s annual reports, our estimates show that during the last 8 full years of mining (2004-05 – 2011-12), the applicant sold Rs. 33,280 3crores of iron ore and reported a profit after tax to the extent Rs. 12,346 crores! A generous 20% return on assets would have been only Rs. 1,239 crores. Thus, Vedanta’s excess profits were to the tune of Rs. 11,108 crores. Had the Permanent Fund imposition been in place during these 8 years, the applicant would have had to pay only a maximum of Rs 3,328 crores, still much smaller than the excess profits that accrued to it.
This amount would still have been saved for the owners of the iron ore, the future generations of Goans. Through this application, the applicant is now trying to deny even this pittance and caviling at a small amount to be saved for Goa’s future generations.
- The Goa Foundation is telling the Apex Court that Goans are not beggars who are ready to sell their ore at throwaway rates. If the mining companies are not able to make their contributions to the Permanent Fund, the Government should step in and resume the leases. The ore is owned by the government in any case, on behalf of the public. Prior to 2004, when the mining boom commenced, most mines preferred to remain shut rather than sell ore at ridiculously low international prices.
(Dr Claude Alvares) Director