Consider a very poor family who discover a pot of gold coins in their ancestral hut. The local laws say that the gold belongs to the family and it could be their chance, finally, to get out of poverty. However the local government insists that it is to be sold at the price that it stipulates.The gold coins have some impurity that needs cleaning up and it costs Rs 250 to Rs 325 to do that. The market value of cleaned-up gold is Rs 2000. But the government says that the family can only sell it at Rs 27. So while those who find the treasure make only Rs 27, those who buy it make close to Rs 1500.

Let us add another dimension to this story. The government had, at one point, set the price at Rs 24.5 and the market value was in several hundreds. In a short period, the market value went up by five times. The family begged the government to allow it to sell its gold nuggets at a higher price now. The government ‘generously’ allowed the family to sell at an increased price of Rs 27.5 instead of the initial Rs 24.5? What would you think of the government?

Would you believe that this is almost the same as what is happening with respect to iron ore? States like Orissa and Jharkhand, which are among the poorest have a lot of iron ore. They would like to sell it and get out of their backwardness. However, as recent articles have pointed out, it only takes Rs 250-Rs 325 per tonne to extract the ore from captive mines, while the market price is around Rs 2000 per tonne. But the central government has set the lease rate (on an average) at around Rs 27 per tonne. Now I hope you understand why Orissa and Jharkhand, despite being rich in minerals, cannot get out of their poverty.

Various committees have been formed, and at times they have recognised the problem. But while Orissa and Jharkhand are losing crores of potential revenue every day, no concrete action has been taken. In recent years the Orissa government has begged the central government to let it set its own price, or allow the state to get a share of the profits. But for inexplicable reasons the government has so far preferred to let the poorest states remain in their poverty, even while mining companies and steel producers make a lot of money.

Why? Are Orissa and Jharkhand not a part of India? Who counts more to the Indian government? The 6.5 crore people of Orissa and Jharkhand or the steel producers? If this is being done to ensure there is an adequate amount of steel for India as a whole, then the subsidy should come from the Indian government surely and not from Orissa and Jharkhand.

Yet another dimension to this story is that, forced by the government’s very low lease rates, states like Orissa and Jharkhand decided to at least get some benefit by preferring steel makers — for iron ore leases — who set shop in their states.That made too much sense. How dare Orissa and Jharkhand make policies that help their people? So it is reported that the recent Hooda Committee has not been fully supportive of this policy and has recommended some conditions that negatively affect this strategy.

We urge the Indian government, which is at present deliberating on the Hooda Committee recommendations, to think of the harm its past policies have done to states like Orissa and Jharkhand, and to listen to the desperate pleas of the governments of Orissa and Jharkhand and their people. They support some of the Hooda Committee recommendations and oppose others.The central government should either allow Orissa and Jharkhand to sell their iron ore at a price they set, based on market rates, or change the royalty calculation methods or create conditions that allow Orissa and Jharkhand to share the profit that the mine leasing and steel-manufacturers are now making because of the low lease rates set by the central government.That would give both states a fair chance to catch up with the rest of India.

However, based on the past record of the government, and the power of the steel and mining lobbies, I am worried that the interests of Orissa and Jharkhand will once again be sacrificed.

The writer is a professor at the Arizona State University