Saswat Kishore Mishra&

Dr. Pulak Mishra

Inclusive Development through Vertical Integration and CSR: Lessons from Mining Districts of Odisha

To be Presented at the2014 World Bank Conference

on “Land and Poverty”Washington, D.C., USA

March 24-27

Department of Humanities and Social SciencesIndian Institute of Technology Kharagpur

West Bengal – 721302, India

2

Introduction

continued …..

The Issues with Land

Importance of Land and Process of Economic Transition

Changes in form and ownership rights

Conflicts of Interests among Different Stakeholders

Impasse of Development Initiatives

Aggravate Social Tension ???

Adversely Impact on Over-all Indian Economy ???

3

How is the issue more acute in Odisha ?

Increasing share of the state in total investment largely due to mineral resources – RBI (2013)

4

Significance of Mining in Odisha

State’s Dependence on Mining Importance at National Level7.5 % to the state’s real GSDP – Government of Odisha (2012-13)11.89 % share in the total value of mineral output (highest in the country) – Government of Odisha (2012-13) Huge direct and indirect employment – Sahoo (2013)Considerable share in exports, royalty and non-tax revenue – Mishra and Mishra (2013)

Accounts for 25.82 %, 32.53 %, and 56.36 % of country’s total reserves of coal, iron ore and bauxite respectively – Government of Odisha (2010-11)89 MoUs signed during 2002-2009 – Government of Odisha (2010-11)Highest share (i.e., 27% ) in the investment proposals received in the country in 2012-13 – The Economic Times, 12 September (2013)

continued …..

continued ….. BUT, 21.67 percent of proposed investment could be

implemented in the year 2012-13 – Pradhan (2013)

WHY – ??? Bureaucratic delay (Red-tape) – Ahluwalia (2002)

Lack of single window system – Chakravarti (2008)

More emphasis on religious faith over benefits Resistance against land acquisition – Major Cause ???

5

Status of Land Acquisition for Proposed Projects†

Mining (non-MoU) Mining-based (MoU)

27.96 % 39.28%Note: †Land acquired as a proportion of total land requirement Source: Official Web Portal of the Industrial Infrastructure Development Corporation (IDCO), Government of Odisha, Bhubaneswar. Retrieved information from http://www.idco.in/2009/orgsubsection.aspx?content=Land on December 27, 2013.

Introduction Contradiction:

Mining leads to socio-economic-human development – Ejdemo & Soderholm (2011); Hazkowics et al., (2011); Fisher et al., (2009)

The models of economic development which argue in favour of transition – Matsuyama (1992); Lewis (1954)

Question 1: Whether failure of earlier developmental initiatives has made people skeptical about the potential benefits of mining reaching them???

Existing mining projects have also adversely affected: Local ecology and livelihoods – Government of Odisha (2012) Land-use pattern, agriculture and forest cover – Singh et al., (2010)

6

continued …..

Objective, Rationale and Methodology

Objective of the paper

To understand the socio-economic outcomes of mining vis-à-vis environmental consequences in Odisha

7

continued …..

Methodology Analysis carried out to

1) compare the socio-economic outcomes in the mining districts vis-à-vis the non-mining districts

2) compare the environmental externalities in the mining vis-à-vis the non-mining districts

Application of descriptive statistics and estimation of ANOVA models with standard measures of the variables

Use of secondary data collected from various government sources

Model: Here, Di = 1 for the mining districts and Di = 0 for the non-

mining districts8

iii uDY

Development Outcomes of Mining in Odisha:Socio-economic Aspect

9

Table 1: State of Development in the Mining vis-à-vis that in the Non-Mining Districts

MeasureEconomic Development

Social DevelopmentEducation Health

Infrastructure Outcome Infrastructure Outcome

Significantly Higher

Size of Economy

Per-capita Income

Share in NSDP

       

Significantly Lower

       

Rural IMR

Rural Female IMR

No Significant Difference

Wealth Indices for Lowest 20 Percent

Wealth Indices for Highest 20 Percent

Student-Teacher Ratio

Teacher-School Ratio

No. of Primary Schools per 100 Sq. Km.

No. of Middle Schools per 100 Sq. Km.

No. of Secondary Schools per 100 Sq. Km.

Literacy Rate

Gender Disparity

School Children Dropouts

No. of Health Sub-Centres

Primary Health Centres

Community Health Centres

Urban IMR

Total IMR

Rural Male IMR

Environmental Externalities of Mining in Odisha

10

Table 2: Changes in Forest Cover in the Mining Districts of Odisha

DistrictProportion of Forest Land Diverted for Mining (2005-10) (%)

Share in Total Forest Land Diverted for Mining (2005-10) (%)

Angul 2.63 9.44Jajpur 16.37 5.01Jharsuguda 21.44 7.86Kendujhar 12.21 40.44Koraput 3.35 6.14Sundargarh 4.74 18.98Source: Official Web Portal of the Ministry of Environment and Forest, Government of India, New Delhi. Retrieved from http://envfor.nic.in/division/india-state-level-basic-environmental-information-database-isbeid

11

Table 3: Changes in Water Level and Water Pollution in Mining and Non-Mining Districts

District Ground Water Level Change pH Level Change2004 2009 2002-04* 2009-11*

Angul 16.00 13.81 -2.19 7.59 7.85 0.26Jajpur 35.83 28.99 -6.84 7.6 7.75 0.15Jharsuguda 22.45 19.58 -2.87 7.63 7.85 0.22Kendujhar 13.29 12.13 -1.16 7.43 7.75 0.32Koraput 6.65 5.70 -0.95 NA NA NASundargarh 15.37 13.50 -1.87 7.55 7.71 0.16Mining Districts

18.27 15.62 -2.65 7.56 7.78 0.22

Non-Mining Districts

16.78 14.24 -2.54 7.71 7.83 0.12

All Odisha 17.13 14.55 -2.58 7.66 7.81 0.15Note: *Average for the periodSource: Official Web Portal of the Ministry of Environment and Forest, Government of India, New Delhi. Retrieved from http://envfor.nic.in/division/india-state-level-basic-environmental-information-database-isbeid

continued ……..

12

continued ……..Table 4: Incidences of Death due to Water and Air-Borne Diseases in Odisha

DistrictWater-Borne Air-Borne

CommunicableNon-Communicable

Mining Districts

Angul 26 41 24Jajpur 9 1 4Jharsuguda 1 2 3Kendujhar NA NA 79Koraput NA NA 67Sundargarh NA NA 48

Average for the MDs 12 15 38Average for the non-MDs 11 10 27All Odisha Average* 11 12 29Source: Official Web Portal of the Ministry of Environment and Forest, Government of India, New Delhi. Retrieved from http://envfor.nic.in/division/india-state-level-basic-environmental-information-database-isbeid

13

14

Question 2: In the mining sector, can we expand livelihood opportunities for the local community to a larger extent along with minimizing negative environmental impacts?

What should be the intervention strategy? International Experiences of developed and developing

economies show: Outcomes of CSR initiatives – major differences??? Developed countries scores over the developing ones

Problems with the developing countries – govt. ineffective regulators – reluctance to take action that may deter investment, weak institutions, collusion of govt. with investors 15

continued ……..

Current Market Model

16

Question 3: Whether well-defined property rights over the natural capital at the community level and/or developing markets for environmental services will be an efficient invention strategy?

Can it alone internalize both environmental consequences as well as costs of mining?

Direct participation of Village Panchayat in CSR activities – can it be the way forward – ??? Can raise the bargaining power of the local

community ??? Can make CSR activities more need based ???

17

continued ……..

Proposed Model

18

Vertical Integration – Necessary ??? Macro-level – Leaming (2007); Cristobal and Biezma (2006)

Local-level – Ejdemo and Soderholm (2011); Castillo et al., (2001)

An integral strategic option for the mining sector – Kudelko (2012)

More and more technologically intensive

Employment gone down in the past decade considerably across mineral types in Odisha – Mishra and Mishra (2013)

Possibly fuelling further increased opposition to mining ???

19

continued …….

Negative impacts of mining on environment – has bearing on peoples’ resistance to the transition process – indicative, though not conclusive

Weak enforcement restricts effectiveness of laws and policies designed to regulate mining activities

CSR initiatives have failed to deliver desired outcomes

Perhaps !!! Assigning well-defined property rights over natural resources at the community level – with proper execution – make mining-led development inclusive

Village panchayats can be involved in framing and executing the CSR activities

20

Summary and Plan for Future Work

21