Goemkarponn desk
Panaji: The Goa Foundation announced that its scientific paper on minerals – which demands that sales proceeds from mining must benefit every individual in society and not just a handful of powerful miners – has been published by the international peer-reviewed Elsevier journal, “The Extractive Industries and Society.” The paper titled “Minerals are a Shared Inheritance:
Accounting for the Resource Curse” is authored by Rahul Basu, Research Director of Goa Foundation and Dr. Scott Pegg, Professor, Political Science, IUPUI, USA.
This press note highlights the main issues raised in the paper which are important for Goans.
The authors argue that a fundamental change in policy approach is needed in order to improve how nations manage their mineral wealth.
Specifically, they advocate treating non-renewable natural resources (like iron ore) as a finite, shared or collectively owned, asset inherited from earlier generations, and their extraction as the sale of this inherited wealth.
The paper goes on to identify several proposals that logically derive from treating mineral sale proceeds as intergenerational wealth rather than as revenues that can be spent. Wealth portfolio management suggests that mineral owners must strive for zero-loss when selling minerals, establish a passively invested future generations fund from the proceeds and distribute dividends from that fund to citizens as the rightful owners of the shared inheritance – the Goa Foundation Benchmark for Public Finance.
The authors show that the Goa Foundation Benchmark and the five principles of fair mining would result in achieving the market rate of return on a larger body of investment, higher economic growth and lower inequality, while the efficiency of public investment and taxation would also improve. This is a win-win win-win-win over current global best practice with minerals.
The authors go on to argue that the current dominant metaphor of proceeds from the exploitation of non-renewable mineral resources as being “windfall revenues” is unfortunately supported by government accounting standards.
The “windfall revenue” metaphor is not only inaccurate but also produces several pernicious effects that help explain the poor management of natural resource endowments in so many countries as well as our own lived experience in Goa.
Indeed, Goa’s experience with iron ore mining forms the case study that underlies the arguments in the paper. It is estimated that over the eight years 2004-2012, Goa lost over 95% of the value of its iron ore (after extraction costs and a reasonable profit for the extractor). There is growing empirical evidence of large losses in mining from around the world including Australia, Jordan, Peru & South Africa. These losses are in effect a hidden per-head tax, paid by all. A few extractors and their cronies become super-rich. Inequality grows sharply. This is looting economics and obviously unfair. The system is maintained by industry lobbying, political contributions and corruption.
Losses in mineral value drive many of the other problems with mining. In effect, the people and future generations of Goa have sold mineral wealth worth Rs. 100 for Rs. 5, a loss of Rs. 95. Naturally the miners are keen to extract as quickly as possible and move on. Trees, tigers, tribals and farmers are labelled as anti-development or anti national.
When they resist, we see widespread conflict.
If we receive Rs. 5 (out of every Rs. 100) from mining, doubling mining would result in us getting Rs. 10. Politicians and citizens perceive more mining = more government revenue = good. However, since extraction isn’t recognized as the sale of inherited wealth, the true loss of Rs. 95 is hidden and not acknowledged. Doubling mining would double the losses. The people and future generations are poorer Increasing mining makes a bad situation significantly worse.
Worse still, even the Rs. 5 received by the government is treated as “windfall revenue” and happily spent. As a result, future generations will inherit neither the minerals nor their value. We are consuming our family gold and becoming poorer. This is not sustainable economics. It is unjust and immoral!
It is important that (a) the Central and State governments record mineral sale proceeds as capital receipts on the Public Account, and (b) politicians, citizens and the media especially do not call or treat mineral sale proceeds like royalty and auction premia as “windfall revenue”, “tax”, “income”, “earning” or “benefit”. We are simply selling off our children’s jeydaad (inheritance).
These ideas are consistent with India’s Constitution, and our National Mineral Policy 2019 which declared that “natural resources, including minerals, are a shared inheritance where the state is the trustee on behalf of the people to ensure that future generations receive the benefit of inheritance. State Governments will endeavour to ensure that the full value of the extracted minerals is received by the State.”
Goa Foundation has made a detailed proposal for the restart of mining in keeping with the Constitution, National Mineral Policy and conscious of our duties towards the future generations of Goa. As mentioned, the proposal is economically far superior to global best practice, and also would reduce many of the problems that we have experienced over the last seven decades of mining. This is the future we need. Let us be the generation that changes the course of history for the better, not the one that finishes off sobit Goa.
