Time for the mining sector to pay up

The mining sector’s image has taken a severe beating over the past few years on everything from violating mining rules to environmental norms.

This has been made worse by the mole-hill of revenue it generates for the govern¬ment compared to its mountains of ongoing problems.

With report after report exposing the sins of the mining sector, public outrage has grown. It is this outrage that briefly led to the residents of Samtse Dzongkhag declaring Samtse as a no mining Dzongkhag, which is an irony given that most mines or potential mines are in this Dzongkhag.

It is also this same outrage that led to the National Council asking for the nationaliza¬tion of the mining sector.

Even the Anti Corruption Commission which investigated corruption in the mining sector also questioned the whole rationale of Bhutan’s mining sector. The Royal Audit Authority reports have explored and exposed the depth of the problems in the sector.

The growing resistance of various local communities to existing or new mining proj¬ects is another indicator of this trend.

The government’s decision to create a State Mining Corporation to mine minerals on its own to earn revenue for the govern¬ment is yet another indicator.

Weather miners like it or not the current perception of them is that they are building vast fortunes by destroying the environmen¬tal and not giving back much.

Now with the Department of Geology and Mines proposing a hike in the mining royalty and mineral rent, Bhutan’s mining sector has two clear options.

One would be to raise hue and cry, start lobbying and do everything possible to avoid the increases which in any case is the more likely scenario.

The other option would be to accept the DGM’s proposal and in doing so go for long term benefits over short term ones. Here the government will have show some stiff spine if this is to be achieved.

The bottom line is that the mining sec-tor has to become a part of larger nation economy that is vibrant, productive and fair. It cannot afford to be seen as an area of crony capitalism, intrigue, in transparency and controversy which will not serve it in the long run.

The first and most important step to this would be to contribute in a bigger way to the national exchequer.

While the value of minerals has shot up internationally and miners and indus-trialists linked to mines have raked in big profits their royalty and mineral rent rates have remained low. The last hike was in 2006 which was marginal and it even left out various minerals.

Currently it would not be wrong to say that Bhutan’s mining sector enjoys an indirect subsidy from the government through low royalty rates which results in low revenue for the government.

If the situation continues it would harm the mining sector as the govern¬ment would have no incentive to promote and strengthen the mining sector. The start of the SMC already shows this lack of trust in the mining sector. With advent of electoral democracy and given the prob¬lems associated with mining the entire sector could be left in the dust.

Many of the problems in the mining sector are due to poor monitoring and regulation by the DGM. The DGM in turn is not able to do a good job given lack of funds and resources. So if the min¬ing sector can start paying up then it can get better regulation and monitoring and even better services from the government through a Mining Regulatory Authority as proposed in the draft mineral develop-ment policy.At the same time the DGM should en-sure that its new levies especially on the construction materials like quarries does not push up the cost of construction in a country where construction costs are already high. It should also not break the back of industries as after all nobody wants to kill any golden gooses no matter how scruffy or small.The result that all sides should aim for is a mining sector paying the true cost of mining instead of being subsidized, and the government then encouraging the mining sector to grow in a responsible and big way to become a major and respected part of the national economy.

 

 

Leadership is, among other things, the ability to inflict pain and get away with it – shortterm pain for long-term gain. George Will

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