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

Author

Listed:
  • Chakraborty, Lekha

    (National Institute of Public Finance and Policy)

  • Garg, Shatakshi

    (National Institute of Public Finance and Policy)

  • Singh, Gurpreet

    (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.

Suggested Citation

  • Chakraborty, Lekha & Garg, Shatakshi & Singh, Gurpreet, 2016. "Cashing in on Mining: The Political Economy of Mining Regulations and Fiscal Policy Practices in India," Working Papers 16/161, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:16/161
    Note: Working Paper 161, 2016
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    References listed on IDEAS

    as
    1. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2006. "Institutions and the Resource Curse," Economic Journal, Royal Economic Society, vol. 116(508), pages 1-20, January.
    2. Auty, Richard M., 1994. "Industrial policy reform in six large newly industrializing countries: The resource curse thesis," World Development, Elsevier, vol. 22(1), pages 11-26, January.
    3. Timothy Besley & Torsten Persson, 2008. "Wars and State Capacity," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 522-530, 04-05.
    4. Chakraborty, Lekha, 2014. "Revival of mining sector in India: Analysing legislations and royality regime," Working Papers 14/129, National Institute of Public Finance and Policy.
    5. Kristian Hoelscher & Jason Miklian & Krishna Chaitanya Vadlamannati, 2012. "Hearts and mines: A district-level analysis of the Maoist conflict in India," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 15(2), pages 141-160, June.
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    Cited by:

    1. Chakraborty, Lekha, 2019. "Federal fiscal policy effectiveness and Inequality: Empirical evidence on Gender Budgeting in Asia Pacific," Working Papers 19/273, National Institute of Public Finance and Policy.
    2. Lekha Chakraborty, 2016. "Asia: A Survey of Gender Budgeting Efforts," IMF Working Papers 2016/150, International Monetary Fund.

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    More about this item

    Keywords

    Political economy ; Regulations ; Mining ; Industrial Policy ; Fiscal Space ; Inequality ; Human development;
    All these keywords.

    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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