Guest post by Rahul Basu
The Goa Foundation, an environmental NGO based in Goa, India is proposing a set of reforms to mining, based largely on the work of the World Bank, IMF and a number of the people conducting the course. Our lens to view mining is the perspective of the owner of the minerals. One of our key recommendations is a Citizen's Dividend, the most successful variant of Universal Basic Income.
- When we inherit something, we are simply its custodians. We are obliged to preserve the value of our inheritance and pass it on to our children. This is also the Inter-generational Equity principle.
- Minerals are non-renewable inherited assets. Under the Indian Constitution, the state government owns minerals, not the federal government. Therefore, in India, this obligation to preserve the value devolves on the government of the state of Goa.
- Imagine we own a piece of gold. We must prevent its theft. We can contemplate selling it to buy agricultural land that will provide income while the preserving value of the gold. By analogy, the mineral remains intact for our children only when we prevent illegal mining. If we decide to sell our minerals, through mining, we must create new non-wasting assets of at least equal value.
At the root is our analysis on iron ore mining in Goa. We found that as far as iron ore mining was concerned, we were losing 95% of the value (economic rent) of our minerals, Rs. 51,446 crores (~US$ 8.5 billion). This was over an eight year period. The loss amounted to 28% of the Goa GDP for those years, twice the state revenues for those years, and Rs.3.5 lakhs each (~$5,800). Our analysis was based on the annual reports of Sesa Goa (now Vedanta India), the largest iron ore mining company in Goa.
Note that since minerals are a part of the commons, i.e., owned by all of us, this loss is effectively per-head tax - everyone loses equally, and a few get richer. This is a highly regressive redistribution of wealth. It is contrary to equality, and contrary to Article 17 of the UN Declaration of Human Rights.
We have found similar issues in fossil fuels in India. As royalty rates are usually set by trying to attract investment into the sector, countries race to the bottom. Therefore, it is very likely that similar losses are present globally. It is possibly even a significant driver of the growing inequality that Piketty has found.
1. Zero loss mining - the owners on behalf of our children and future generations (the State of Goa in particular), must ensure that the full value of the mineral be captured. Losses are unacceptable.
2. All receipts from minerals be treated as capital receipts (sale of assets) and be deposited into a Future Generations Fund, invested entirely overseas. This is like the Norway Government Pension Fund. Currently, mineral receipts such royalties are treated as windfall revenues, to be blown up. Instead, they are our inheritance, and must be saved for our children. A Future Generations Fund is simply an endowment fund whose income is reinvested to fully compensate for inflation.
3. All the real income from the fund be distributed equally to all as a Citizen's Dividend, as a right of ownership. This is like the the Alaska Permanent Fund Dividend. The principal goal is to create a stake for the Citizen in their minerals. All must be distributed to leave the state as a non-mineral state - no incomes from minerals.
4. We want this implemented across India and globally. It is fair, our right and our duty to our children.
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