Photo Courtesy: State Mining Corporation Limited

Mining Bill deadlock stuck over benefit of Elite few Vs National benefit debate

After a deadlock within the Joint Committee of the National Assembly (NA) and National Council (NC) the ruling party members of the committee are having a meeting on their position on the bill while the opposition is expected to do the same. The ruling party and opposition are largely on the same page on the bill so far.

The NC members in the meantime had gone back to their plenary or the house on the issue.

There will be a final effort to break the deadlock as the joint sitting is two weeks away.

However, a source within the Joint Committee (JC) said that there is also every possibility that the two sides do not reach an agreement given the short time and so the bill could get deferred to the next joint sitting session. This is especially as there are 10 major points of dispute.

As reported before by this paper, after five rounds of meetings of the JC and give and take the main issue is now Dolomite.

The NC members have insisted that as far as minerals are concerned Dolomite should come under state control given the huge turnover which is almost equivalent to a Chukha type of hydro project.

The NA members initially resisted this but then agreed to it as long as 49 percent of shares is floated to the private sector or the public with some members arguing it would bring more efficiency and also ensure local community benefits. They feel that private participation would also embolden the local community to ask for their benefits which they would not do with an entirely state owned operation.

The Opposition Leader Dorji Wangdi said that the most important bill in the current session even more important than the budget is the Mining Bill. He said the sector can generate huge revenue and so if they get the law wrong then it can really mess things up. He said the mining Bill must ensure benefits to the country and the people.

He said it will be disastrous if the bill becomes a dead bill as the situation would revert back to the current law and system which has had issues for the last one decade.

The OL said that while dolomite can come under state ownership it must allow private shareholders and also private operations under state ownership.

A NC member of the condition of anonymity said that what the NA members do not realize is that if Dolomite came under a DHI SOE like SMCL it would first pay 30% corporate tax at the SMCL followed by another 30% CIT when the same funds go to DHI and then dividends to the government. He said that the same dolomite mine under private sector control would only pay 25% CIT.

The NC member said that the NC has done more research on the issue and since 2008 has a consistent stand that minerals are state resources as per Article 1 section 12 of the Constitution.

He said the second issue is that the 2014 RAA report on the mining sector showed a lot of illegal practices in the mining sector including depriving minority shareholders of their revenue.

The member said that another factor to consider is that as per the Constitution Bhutan is essentially a welfare state that has to provide free education and health care but it cannot do so without a vibrant and consistent source of revenue.

He said the argument from the NA’s side has been on the participation of the private sector. But here the NC member said that when it comes to Dolomite the only private sector involved would be around 5 to 6 families in Bhutan who can put down Nu 600 mn to Nu 1 bn as the initial 10% deposit and have billions more to bid for the mine.

He also said that a private company would not only pay far lesser taxes at 25% compared to 60% for DHI but the private company would significantly inflate costs and also under invoice to pay less taxes.

He gave the example of The Bhutanese story where SMCL is getting Nu 1,150 to Nu 1,250 per MT of dolomite compared to Nu 510 and Nu 573 for the earlier private JMCL company. 

The NC member said the question essentially is if the state wants around Nu 40 bn in the next 15 years in revenue from Dolomite run by an SOE or it wants Nu 18 bn or less from a private company.

The NC member also said that currently private companies are not allowed to own hydro projects given the huge revenues involved and so the question is if the country is willing to let one or a few families own a mine which is equivalent to a Chukha project in revenue for the next 15 years.

He said letting only a few families own such resources would also widen the gap between the rich and the poor and this internal instability could pose challenges to the country’s sovereignty.

One point was that in the current COVID-19 crisis it was essentially the Mangdechu project that came to the rescue of the state with consistent revenue and dolomite can be one such source of revenue.

One argument has been that the dolomite can last many years but new technology  and additional machines can cut down the number of years.

The NC member said that some have expressed apprehension on the efficiency or the management of a mine under an SOE but here he said that the DHI is a very well managed system that demands accountability and performance from its people.

He said that experience of the Temasek Group in Singapore and even Norwegian state companies that manage its mineral wealth like oil have done very well.

He said that the NC is not being unreasonable as it is willing to let all captive mines required by industries be owned by private companies and also all dredging and stone quarries as there the income and investment difference is not huge. But he said in the case of a mineral mine like dolomite there is very little risk and investment involved but huge and obscene profits.

He said the use of the word nationalization of mines is not correct as nationalization refers to a private company being taken over by the government, but in the case of the mines the lease period has expired and it has gone back to the government.

The NC member said that the real argument in the mining bill essentially is between the lobbying of a few very rich and elite families and the national benefit on the other hand.

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