Cashing in on Mining: The Political Economy of Mining Regulations and Fiscal Policy Practices in India

Lekha Chakraborty, Shatakshi Garg () and Gurpreet Singh
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Shatakshi Garg: National Institute of Public Finance and Policy
Gurpreet Singh: National Institute of Public Finance and Policy

Working Papers from National Institute of Public Finance and Policy

Abstract: Against the backdrop of the recent Mines and Minerals Development and Regulation (MMDR) Amendment Bill 2015, this paper examines the political economy of State-business relations in mining sector, in the two newly-formed States in India, Chhattisgarh and Jharkhand. It is important to note that the two States have low income despite being resource-rich.. Analyzing the legal fiats (State Reorganisation Acts and Fiscal Responsibility Acts), it was revealed that the formation of new States has not created any distinct fiscal agency in the extractive sector. The States - both parent and the new States - have adjusted their deficits to conform to the fiscal rules (FRBM Act) stipulated by the Centre; and these States have revenue surplus - not deficits - ex-post to the enactment of fiscal rules. The new States have insignificant share of mining proceeds in their State exchequer, around 10 per cent of the revenue receipts. Though nebulous estimates from fresh mining e-auction proceeds are on board, ambiguity remains how the newlygenerated fiscal space would resolve resource curse. The use of fiscal proceeds from mining is difficult to map as it is not yet earmarked for redressing socio-economic inequalities of mining districts. However, the new MMDR Bill 2015 stipulates that District Mineral Fund (DMF) would be created in mining districts to link the proceeds to human development. Despite the data paucity, based on our analysis we caution that the road map of forthcoming DMF to plough back a portion of royalty and fresh e-auction mining proceeds exclusively to the mining districts may exacerbate spatial inequalities.

Keywords: Political economy; Regulations; Mining; Industrial Policy; Fiscal Space; Inequality; Human development (search for similar items in EconPapers)
JEL-codes: H5 I3 L5 O2 Q3 (search for similar items in EconPapers)
Pages: 37
Date: 2016-01
New Economics Papers: this item is included in nep-pol
Note: Working Paper 161, 2016
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Citations: View citations in EconPapers (2)

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