Ethical Performance
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Indian law would make firms set up CSR budgets

June 2010

India looks set to get legislation that will require mining companies to put aside specific sums of money for corporate responsibility programmes.

A draft Mines and Minerals (Development & Regulation) Act contains provisions that, if passed by parliament, would require mining operations to provide local state authorities with a ‘CSR document’ outlining set levels of annual expenditure by the mining company on ‘socio-economic activities in and around the mine area for the benefit of the host population’. The draft legislation says this could, for instance, include schemes that encourage local self employment and entrepreneurship.

The CSR document will be reviewed on a regular basis by a committee of the local state government to make sure it is being applied. While it remains unclear exactly what sanctions, if any, will be applied to companies that do not live up to their CSR documents – or even fail to draw them up in the first place – parts of the draft Act suggest that permission to mine could ultimately be revoked.

The Act would additionally give central government the power to issue directions to mining companies ‘in the interests of sustainable development’ – in particular to ensure protection of the environment and the control of pollution.

Central government will also be required to develop a National Sustainable Development Framework, in consultation with state governments, that will contain guidelines on sustainable mining. The framework will outline  ‘broad criteria beyond which mining may not be deemed sufficiently sustainable’, promoting ideas such as the setting up of ‘consultative mechanisms’ with stakeholder groups from the earliest stages of exploration.

The planned legislation also says there should be ‘a system of public disclosure of mining related activities and environmental parameters, including indicators and mechanisms to facilitate formal and informal sustainability audits’.

Additionally, state governments will be given the power to set up ‘state mineral funds’ that use money levied form mining firms to improve local infrastructure and community facilities.

The Indian government’s interest in CSR has increased dramatically over the past year, and the draft Act may presage similar moves in other sectors. Last year the government began to consult various industry associations about measures it might introduce to boost the take-up of CSR programmes across the country – including a possible requirement on all companies to earmark a percentage of their turnover or profits for corporate responsibility projects (EP11, issue 8, p3).

However, there is particular urgency in its attempts to deal with the Indian mining sector. Market liberalisation over the past 20 years has led to a shift from state to private ownership, with listed companies such as Sesa Goa, Sterlite, Tata and the Steel Authority of India becoming dominant. The new legislation is partly designed to wrest back some government influence over the sector’s activities.

Mines and Minerals (Development & Regulation) Act | Asia | Legislation

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