Bhutanese Mines found to be dirty, mismanaged and not contributing enough in RAA report – Part 2

In 2008 a RAA Performance Audit report on the mining sector opened the eyes of the country to an out of control mining sector which was violating various norms and laws, destroying the environment and also creating losses for the exchequer.

The report was discussed in the Parliament itself and action was promised but five years later another RAA report on mines show that little as changed and things have even have gotten worse.

The report titled “Leasing of Government Land, GRF Land and Mines,” was conducted between 14th September 2012 and 31st January 2013. The first part of report covered in the last issue by the paper focused on irregularities in leasing government land.

The second part of the report which is the focus of this article has a lengthy and detailed performance audit on mines that shows in-transparency in leasing of mines, revenue loss for the government, missing mine reports, environmental destruction, human impact, illegal mining, anomaly in getting public clearances among many other violations.

Bhutan currently has 81 mines and quarries in operation across the country with 36 having been closed over the years.

The report found that the Department of Geology and Mines (DGM) despite having a reasonably adequate legal framework and administrative capabilities severely lacked effective monitoring and enforcement action.

Administrative and Financial Management of Mines

The RAA found that mines and quarries that were actually explored on government funds were being given out to private individuals on a ‘first come first serve’ basis without auctioning them as required by the Section 15 of Mines and Minerals Management Regulations 2002.

The RAA found 18 mainly talc mines which had been issued out in this way and the report said that this may provide opportunities for indulgence in corrupt practices and nepotism.

Except for three mines all the 81 mines have not been auctioned. The RAA in an experiment to find out the extent of revenue loss took a sample of just seven mineral mines. The RAA by comparing the revenue from the three auctioned mines and the minerals found that in the case of just 7 mines the revenue loss to the government was Nu 307 mn.

In what may raise serious questions out of the 314 DGM reports on detailed explorations of different mines and minerals across the country done on government funds around 46 reports were missing. The RAA found that DGM officials had taken 95 such reports at various times since 1998 but 46 had not been returned.

Out of the 46 missing reports 22 of the mines were found to be operated by private parties.

The report said that the possibility of misuse of these reports and passing of information or reports selectively to private parties through collusive practices cannot be ruled out.

As per mining rules the lease of a mine can only be transferred after a three month notice to the mining head. The RAA came across 8 cases were leases were transferred with some being transferred as much as three times and others within six days. The RAA said that such practices could mean fronting, speculative gains and lack of competency from the one applying for mines.

The RAA found that 11 mines and quarries had closed or were suspended due to poor quality deposits. The report said that such premature closures showed inadequacies and inaccuracies in exploration works and studies.

The report also found that Royalty and Mineral rent which is the main source of government revenue had not been revised for as much as 10 years to six years resulting in loss to the exchequer. This is while mineral prices have been increasing globally. There was also no proper basis for the fixing of royalties and rents. Even the revisions that did happen were minimal and not in keeping with market realities.

Environment and Social issues

The report says that mining industries in the country had not taken serious consideration of social and environmental issues.

It found that local community clearances were issued without proper consultation. The report found that the mining laws were not clear on public consultation. The role of the local government and the procedure for such a consultation was not clear making it a varied process. At times the DYT did not even consult the affected community and gave approvals while in other cases people used unscrupulous means to get clearances.

The RAA came across a list of 22 mines including some major ones that were too close to human settlements and agricultural land and were having a major impact. In some cases the private land and houses were found inside the mining area.

The report found that no proper consultations had been done with the owners, their land had been damaged by mining, farmers were left with no option but to accept compensation which was meager for them, there was reduction in farm production and various pollution effects were visible.

There were no studies done to assess the impact of mines on the local community and this was made worse by mines not following mining regulations. The RAA said there is a need to review allowing of mines near human settlements.

The RAA found that 17 stone quarries were located too close or adjacent to the highways causing major hindrances to the traffic. In one case the Gewachu quarry located in Wangdi had killed one and critically injured two in 2010.

The report found that of the 42 closed mines 23 sites had not been restored at all as required under law and the lease agreement leaving open scars. Even in other mines were restoration work was carried some were not in confirmation with mining regulation. In fact none of the mines have restored the top soil which is crucial for green growth.

It was also found that mining practices were not being carried out as per mines plans. Except for some captive mines waste management in most mines and quarries were not carried out as per regulations. There was non-maintenance of height and width of mine benches or terraces.

The RAA found that Nu 60.44 mn was outstanding in unpaid Environmental Restoration Bonds to the DGM from 60 mines. The bonds are like a security deposit to minimize environmental damage.

The report also found that Corporate Social Responsibility is yet to be internalized and put in proper practice by the mines. Though some major companies were providing incentives like cash, school buses, ambulances, CGI sheets etc there was no clear strategy and policy of CSR. In the case of Druk Satair and S.D Eastern the average annual percentage of contribution towards CSR against their turnover was a meager 0.39 and 0.38 percent. It says such meager contributions are not enough considering the impact of the mining activities.

RAA also found occupational health and safety issues. Safety and protective gears in a limited form were provided only by larger mining companies. With the exception of a few mines there were no provisions of proper water within the mine sites for employees and there were also no proper latrines with many resorting to open defecation.

With the exception of a few big mines none had dust suppressing measures which is required by law. Even for these big companies the complaint from locals was that it was not done regularly. The report found that dust emissions from mining operations was the biggest problem for local communities, there was a co-relation with respiratory problems and there was an impact on local crops.

In violation of mining laws none of the mines have carried out environmental quality monitoring thus far and the DGM also has not enforced this rule.

Other issues

The RAA report mentioned the 2010 ACC investigation of the illegal Sukreti Talc mining happening under the guise of construction a school. The RAA noticed that the site given was not feasible for any school and would be inaccessible during monsoons. The report says that DGM should have levied a fine of Nu 25 mn as per regulations and the mineral dispatched but only Nu 270,000 fine was levied. It also said that no restoration works had been done at the site.

The RAA found that nine mines sampled by it all had excess land measuring a total of 35.78 acres. The RAA said that since all 9 had excess land it is highly possible that remaining mines in the country have excess land estimated to around 465 acres. This would mean mines are mining excess land without paying the excess surface rent.

It was also found that there was only one mining consultancy Kalchakra Consultancy doing all the mine plans and studies many of which were of poor quality, factually incorrect and failed to properly take into account human and environmental impact. 8 out of the 11 closed quarries due to poor quality and premature exhaustion of minerals were prepared by the company. Many mining operators admitted that the mine plans prepared by the company had significant disconnect with field realities.

The report says that the DGM suffers more from a quality of technical mine staff than a shortage in numbers and so a strategic human resource planning is required.

It pointed out that the Department of Roads had awarded highway widening activities to contractors in four Dzongkhags and in the process allowed salvaging of construction material. But highway widening was not based on overall plans and DoR allowed widening which was akin to quarrying even in already wide stretches. In the Tekizampa-Trongsa stretch the contractor was found widening the road wherever there was a good deposit of stones. The widening overall was not done well and went deep in where only good stones were available. Despite rules overburden was dumped below the road causing major environmental damage. Loose and hanging rocks left behind still pose a major risk. The contractors were Kuenley Gyeltshen, Dasho Kezang Wangchuk, Rinchen Dorji and Dawa Dem.

The report said that the Dzongkhag forest office had sanctioned around one acre for surface collection in Dhur, Bumthang but the contractor was found excavating the sub-surface by deploying and excavator and operating it as an illegal quarry. The site located above the Dhur farm road caused inconvenience to the road users. The forest officer was not aware of the situation showing a lack of monitoring.

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