RAA mines report points out service delivery issues in mining sector

With the government counting on mining as one of the key growth areas of the economy, however, the performance audit on Bhutan’s mining sector by the Royal Audit Authority (RAA) points out some issues in service delivery and delays in processing mining applications.

The data provided by Department of Geology and Mines (DGM) showed that there were 587 applications received during the period June 2009 to January 2014. It was found that only 10 applications were approved.

The approved applications had taken a minimum of 64 weeks to 176 weeks for its final approval and commencement of the lease.

However, it was noted that the lease application of Dungsam Cement for limestone had taken only 16 weeks.

It was found that delays were caused at various levels within the department, dzongkhags and the National Environment Commission. As of the date of audit, on 1 June 2014, the pending applications had already exceeded the prescribed timeframe by 118 to 1,711 days.

Of the 587 applications made, 361 applications were pending at DGM and relevant authorities. The remaining 226 applications included those already approved, rejected by the department for not being suitable on further appraisals, and others being rejected by relevant authorities.

Of the 361 pending applications, 158 applications were pending at the DGM because the sites were not visited by the department, 78 applicants remained pending with the department for other reasons, 108 applications remained pending at the dzongkhag-level, eight applications remained pending at the NEC and nine applications remained pending at the DGM because the proposed sites coincided with other applications.

The report said that none of the applications were processed within the timeframe, except in the case of Dungsam Cement, prescribed by the Mines and Minerals Management Regulations 2002 (MMMR 2002).

Further review of the systems adopted for processing lease applications showed that there were no systemic processes designed for receiving of applications appropriately, by recording the receipt and control procedures to track movement of applications within various divisions or units of relevant agencies, like dzongkhags and NEC.

According to the report, it appeared that the control procedures are flawed through un-systemic procedures adopted in processing of applications. It says the monitoring of applications is, therefore, rendered ineffective as there were no recorded movement of applications within divisions and other agencies.

The DGM responded to the RAA on the reasons for the delay. It said that that it was not able to carry out pre-feasibility study of all the mining applications received by the department. The reasons it stated were that the mining division was faced with an acute shortage of manpower, with some engineers resigning and others going for higher studies. DGM said the travel budget for the fiscal year 2013-2014 was very limited ,and got exhausted by the end of March 2014, and so most travel proposed for pre-feasibility study was done away with.

DGM said that the department makes a schedule for site visits to different parts of the country for carrying out pre-feasibility study, but some applicants failed to respond or report to the site. DGM said that most of the applicants do not follow up on their applications after submission to the department. DGM said some applicants are hard to reach as they keep their phones switched off or change their contact numbers.

DGM also said that to screen out old applications received, it announced in the media to follow up on applications submitted before 31 December 2010 by 30 November 2013. Non follow up was considered as not interested and were rejected thereafter.

The Ministry of Economic Affairs, in its response, said that there needs to be a separate chapter in the report to address regulatory reforms, and it said that it would help the reform agenda if the RAA recommends the need for administrative and regulatory reforms of the industry.

The Final Mines Feasibility Study (FMFS) report is the final mineral deposit assessment report containing, in reasonable detail, the technical, financial, environmental and social impact analyses that are required prior to approval of a mining lease. The RAA, in its review of the FMFS, found inaccuracies and inconsistencies.

The quantities of planned production, as per FMFS, compared to actual production varied as high as 279% to -91%, indicating incorrectness of information. There were also issues of premature closing of mines due to poor quality of deposits, contrary to what was indicated in the FMFS. There were also other issues, of miners not being able to construct roads, mentioned in FMFS, due to steep gradients, blasting not being required as recommended by FMFS, and wrong dumpsites for overburden.

The MoEA responded saying that the variation in production maybe due to various reasons, such as fluctuations in the market that are beyond the control of mine operators. It also justified the error in recommending blasting due to the complicated nature of the Himalayan geology.

The RAA also pointed out that despite a huge endowment of mineral resources in the country, DGM has reportedly completed geological mapping of only 33% of the mineral resources of the country.

It says that since the information of overall stock of natural resources in the country is a basic requirement for overall management of the sector, the non availability of requisite information would impede formulation of appropriate policies and strategies to translate these noble visions.

The MoEA, in response, said that no country undertakes detailed geological mapping, unless for a specific purpose, as it was not practical. The MoEA, however, acknowledged that making a geological map is invariably the first step in any mineral exploration and mining, including drilling, geo-chemistry, geo- physics, geo-statistics, and mine planning.

The RAA mine report carried out from 2008-2012 found poor and weak monitoring by the government and also unethical practices by mining companies that went against the interest of minority shareholders (story done in last issue).

The report, which is as a result of the National Council resolution in 2013, will be deliberated on 1 December 2014.

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