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Community Participation in Monitoring Coal Production

This note critiques the article on illegal coal mining (EPW, December 8, 2007) on what causes and constitutes illegality when a large number of people's livelihoods depend on it.


Community Participation could vary subject to the optimum or desired social welfare. However, we may
in Monitoring Coal Production arrive at an ever broader objective function if we club this aspect of social welfare
with the notion of sustainable develop-
Amarendra Das, William Joe ment, one accentuated by the popular

This note critiques the article on illegal coal mining (EPW, December 8, 2007) on what causes and constitutes illegality when a large number of people’s livelihoods depend on it.

Amarendra Das ( and William Joe ( are research scholars at the Centre for Development Studies, Thiruvananthapuram.

Economic & Political Weekly

february 9, 2008

n her article, Kuntala Lahiri-Dutt (EPW, December 8, 2007) presents a lively picture of illegal coal mining activities in the eastern India and vividly depicts the plight of local communities. Witnessing the weaknesses of a number of policies – relating to minerals, environmental impact assessment, rehabilitation and resettlement and land acquisition – the author prepares a case for the need to amend the incumbent policies in the context of a rapidly changing institutional environment. Reflecting upon the exclusion of local communities from accessing the benefits of a natural resources, she argues for recognising their rights. However, her prescription to formalise illegal mining activities rests upon weak theoretical explications and deviates from the core problem. Also, Lahiri-Dutt’s suggestion to evolve a co-management strategy to manage the collieries calls for cautious scrutiny. Under this backdrop, we examine the strengths and weaknesses of alternative institutional arrangements for the management of mineral resources and present a rationale for stateownership of mineral resources, specifically coal but with community involvement in monitoring the mechanism, subject to an appropriate benefit sharing model. Our prescription for co-monitoring mechanism is motivated by the need for two monitoring the mechanisms, one over the property rights and the other for environmental compliance. Further, we share our concerns towards the pauperisation in the mining belt and acknowledge the local need for coal; however, we differ on the opinion of legitimising the illegal mining activities and provide an apt alternative.

Mineral resources being the gift of nature, its benefit should accrue to all of mankind. Undoubtedly, appropriate institutional mechanisms are fundamental in ensuring equity and social justice in the distribution of resources. But depending upon the nature of the resource and its use, the efficacy of alternative institutions Brundtland Committee report [WCED 1987]. It is of interest, here, to recall this concept because it places equal emphasis over achieving both intra-generational as well as inter-generational equity. In this regard, the important task is to evolve an institutional framework that could perform efficiently and lead us to the frontier of social justice.

Rationale for State Ownership

On this remark, Lahiri-Dutt’s criticism of the existing mineral policy and questioning of the rationale for state intervention prompts us to weigh the pros and cons of alternative institutional arrangements for mineral resource management. Our contention is that both private and community ownership of mineral resources would be incapable to ensure distributional justice. The insensitivity of marketbased instruments to take cognisance of distributive justice, both intra-generational as well as inter-generational1 is well known from public economics literature. Similarly, the community ownership of non-renewable resources would also fail to contemplate the global dependency and need of future generations. Under this circumstance, stateownership of mineral resources would be an ideal solution.

In a federal set up like India, wherein the sub-national entities are randomly endowed with different natural resources, a decentralised property ownership – privately or community based – structure might significantly increase the transaction cost. In extreme cases, it could hinder the smooth flow of resources within the country as well as between certain key sectors. For example, thermal power generation in India accounts for more than 70 per cent of the overall power supply and the coal needs of thermal power stations are largely met by Coal India. Under such a circumstance, if the property right over coal is divulged into the hands of private or community-based organisations, it might cause serious disruption to the coal supply and hence power


generation. Similar reasoning could also be attached to several important and predominantly coal using sectors of the economy such as steel and cement industries. State-ownership of resources, reduces these uncertainties associated with other property right institutions and fulfils the strategic concerns of the nation.

Another pertinent cause for our disagreement with private or community ownership of collieries is inherent with the social and environmental cost involved in coal mining. The failure of market to internalise these costs is widely acknowledged. Regrettably, the broader connotations of the term environmental cost – which includes the cost of deforestation, loss of biodiversity and all kinds of pollutions related to mining – are seldom internalised by the private players. Apart from the environmental cost, mining activities generate huge social cost in the form of displacement, loss of livelihood, and social exclusion. The widespread protests and strong oppositions faced by various mining companies from the local people such as in the Kashipur region of Orissa, readily recounts upon this fact. The pro-market concept of corporate social responsibility also remains incapable in redressing the true social and environmental costs.

Community Participation

Given the state of affairs in the coal sector in India, Lahiri-Dutt argues for a communitybased institutional arrangement (however, we feel that the author’s allusions to institutional arrangements like the joint forest management or integrated water resource management system, is inappropriate for several reasons starting with the dissimilarities in the nature of the resource itself) to manage the collieries. But the efficacy of such a solution needs cautious scrutiny. Unlike the co-management of renewable resources, wherein the community is provided only with the user right over the sustainably extractible resource keeping the stock intact, in case of nonrenewable resources like coal, it is impossible to extract resources without depleting the original stock. Therefore, for the participation of the local community in nonrenewable resources management, there could be two possible alternatives. One, by transferring the ownership over the resource stock to the community, whose efficacy is questionable given the problems discussed earlier. The other option is

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December 29, 2007

to keep the ownership rights with the state and assign the monitoring duty to local community. For this assignment, the latter could be rewarded by sharing a proportion of the revenue generated through mining activities. This monitoring process would have two components: (a) monitoring over property rights; and (b) environmental regulations. Given the information and proximity to the resources, the community will be in an advantageous position to closely monitor property rights and environmental regulations. Monitoring the property right would ensure protection of the resource stock from illegal actions and that of environmental regulations would help achieve better compliance by mining firms. Even the proposal of leasing out the production activities to private players would not be harmful if this undergoes monitoring by the local community.

Lahiri-Dutt draws her argument to legitimise the informal mining sector from two weak viewpoints. First is the issue of pauperisation in the mining area wherein the proposal of legitimising illegal mining activities by recognising the right of local community over minerals would not prove to be an effective solution. The problem here is in relation to distribution

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and therefore, the remedial measure should be at that very point. Alternatively, the issue of pauperisation could be more effectively addressed by providing adequate compensation to the affected local communities.

The second premise on which Lahiri-Dutt builds her argument to legitimise the informal mining activities is the ineffective allocation of coal to satisfy local demand. But allowing the local community to extract coal and sell it in the local market would have serious consequences on efficiency and health. For instance, studies on efficiency and environmental performance of small-scale mining show mixed results [Macmohan G et al 1999] and hence, it is difficult to argue in favour of efficiency gains and better environmental performance of small-scale mines. Even Lahiri-Dutt has pointed out in her article the less than satisfactory safety measures in the illegal collieries, which might further deteriorate as small-scale mining might fail to ensure acceptable safety standards. Limited operating scales would constrain the local community to adopt adequate safety measures. The present miserable performance of illegal mining on safety standards is also testimony to this fact. Under these circumstances the mechanism to meet the local demand for coal should not entirely be vested with the community. However, our stance may not be read as our insensitivity towards local demand which should also be favourably considered. Rather, we seek an enhanced role of community in the allocation of coal in the local market by placing a decentralised and transparent mechanism. Here we see a greater scope for the inputs from market surveys to arrive at the estimates of required number as well as location of coal outlets. Invariably, panchayat level institutions could be assigned with the additional responsibilities for the regulated marketing of coal. An appropriate distribution model (such as one of liquid petroleum gas cylinders) based on differential pricing and rationing mechanism can be easily adopted as per the nature of use.

Although the benefit of resource endowment is enjoyed all over the globe, the brunt of environmental and social costs are disproportionately borne by the

Economic & Political Weekly

february 9, 2008

communities in the adjacent mining areas. In the entire process of mining – beginning with impact assessment to compensation payments – the voice of the community goes unheard. The frequent episodes of such disquieting incidents in India have only accumulated their agonies. The existing policies remain insensitive towards this and call for major changes in at least two directions. Firstly, by bringing more transparency to the impact assessment exercise and secondly, by adopting a participatory approach to evolve the compensation guidelines.

Social Costs

As rightly pointed out by Lahiri-Dutt, the present policy of impact assessment only looks into the environmental impact, which is also not comprehensive and very often played with methodological jargon, and blatantly ignores social impacts. The methodology to assess the environmental impact has been extremely poor as it adopts a reductionist approach to measure only the monetised part of ecological services and overlooks the importance of biodiversity and ecological order. For example, in the case of mining projects in forest areas, companies are directed to pay for the compensatory afforestation programme but such a policy simply ignores the value of biodiversity and the eco logical order. Compensatory afforestation programme often fails to restore the original ecolo gical order and biodiversity and this distortion poses adversities to the livelihood of local communities. The centralised approach of the present scheme of impact assessment has remained flawed and opaque, and therefore, the incumbent approach needs a complete change in order to ensure justice to the local communities of resource rich regions. Attempts should be made to enhance transparency by adopting a participatory approach in the decision-making process. In this matter, community participation in impact assessment would be an appropriate mechanism to arrive at real environmental and social costs.

To ensure active participation of the local community in monitoring the property right and environmental compliance, an adequate rewarding mechanism needs to be worked out. In this regard, the revenue generated from mining sources and its utilisation should be carried out in a transparent manner. Innovative measures such as the Extractive Industries Transparency Initiative propounded by Global Witness, a non-governmental organisation, with its Publish What You Pay campaign are noteworthy steps and needs wider implementation. Murphy Catheleen (2007) elaborates on how transparency leads to better environmental performance. Transparency in the entire process of impact assessment, assigning right to extract resources, revenue generation and utilisation would not only help the local community to obtain adequate compensation but also ensure better environmental performance.

For the larger interest, ownership rights over coal should be retained with the state. However, the participation of local communities could be sought for better enforcement of property rights as well as environmental regulations. The success of community participation would hinge upon winning their confidence by providing them adequate compensation and involving them in the process of decision-making. Community participation in monitoring over property right and provision for supplying coal in the local market would enable us to curb illegal mining activities.


1 On intergenerational equity Fischer (1988) puts it as follows, “The essential idea is that consumption by future generation is a public good to members of the present generation. That is each of us derives some satisfaction from the prospect of a brilliant future for civilisation. Yet the fact that you reap this satisfaction does not mean there is any less for me and vice versa. Then we are all made better of by a collective decision to save and invest more than each of us acting individually would have done. This, in turn, implies that social discount rate is below the private rate.”


Fischer, Anthony C (1988): Resource and Environmental Economics, Cambridge University Press, p 70.

Lahiri-Dutt, Kuntala (2007): ‘Illegal Coal Mining in Eastern India: Rethinking Legitimacy and Limits of Justice’, Economic & Political Weekly, Vol 42, No 49, pp 57-66.

Macmohan Garry, Jose Luis Evia, Alberto Pasco Font, Jose Miguel Sanchez (1999): ‘An Environmental Study of Artisanal, Small and Medium Mining in Bolivia, Chile and Peru’, World Bank Technical Paper No 429, World Bank, Washington DC.

Murphy Catheleen (2007): ‘Environmental Performance and Transparency: Lifting the Resource Curse in Peru’, Ecological Economics, December 12.

World Commission on Environment and Development (1987): Our Common Future, Oxford University Press, New Delhi.

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