* Climbdown aims at attracting badly needed investment
* Profit-sharing formula a bid to smooth land acquisition
* Industry bodies say 26 percent profitsharing too costly
By Jo Winterbottom and Krittivas Mukherjee
NEW DELHI, June 30 India could allow foreign and
domestic mining companies to share less than 26 percent of their
profits with local communities under a draft law, a mining
ministry source said, in a climbdown aimed at attracting badly
needed investments to the sector.
The bill proposes the profit-sharing formula in a bid to
smooth land acquisition, a touchy issue in the countryside,
where many oppose natural resources being carted away by
A part of government moves to expand social programmes for
the poor, the bill seeks to simultaneously please its core
support base, block flows of new recruits to the Maoists and
balance modern lifestyles against traditional ways.
While industry bodies are reconciled to sharing some
profits, they have baulked at 26 percent, saying that will raise
business costs too much and deter investors, a fear the
government appears to be recognising.
The ministry source told Reuters while the bill is likely to
retain a reference to 26 percent as a ballpark figure, it would
include a clause that would allow companies to approach the
government for a concession.
"There is a realisation that you cannot have a blanket rate
for all minerals because the cost of mining of each mineral is
different," the source said on condition of anonymity because
the bill has still to be presented before parliament.
"So what we are doing now is giving companies the option to
come to the government and say a certain percentage is too high.
We can then consider.
"For example if you are asking for 26 percent (of profit
from a mine) from a diamond miner, will he come? He may say I'm
willing to give 2-3 percent."
The mining ministry says that profit-sharing should make it
easier for mining projects to win local approval and accelerate
the pace of developments.
Years of protests, sometimes violent, have delayed many
industrial projects, including South Korean steel maker POSCO's
plant in Orissa state, the biggest foreign direct
investment in India at $12 billion.
Protests against big industrial projects are a phenomenon of
the developing world from Brazil to Indonesia, and making
investors plough back a portion of their income into development
of local communities has been one way of dealing with
India's mining sector has only opened up fully to private
investors in recent years and state-run companies have lacked
the funds and expertise to probe deeper than the top 50 metres
or so where its iron ore and coal reserves are found.
The mining bill should go to the government for approval
after a possible final meeting of a group of ministers on July 7
and could be presented in parliament in August. The bill could
take a year or so to make its way through parliament.
(Editing by Clarence Fernandez)