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Mining Punjab for sand: Demand 2 crore tonnes a year, business Rs 3,000 crore

What’s legal and what isn’t in a thriving business that is driven by construction in Punjab and has brought the interests of a minister under the scanner

Written by Kanchan Vasdev |
Updated: June 1, 2017 5:03:09 am
sand mining, punjab sand mining, sand mining business, sand mafia Sand being mined from a dry riverbed in Amritsar district. File

What is the sand mining business?

Sand is an essential ingredient in the construction business and is also used as an abrasive across several manufacturing industries. In Punjab, sand is mined mainly from riverbeds in the dry months, when the water is a trickle in most of the rivers and tributaries, and vast portions of the bed are dry. Sand is mined in 14 districts of Punjab.

What is the government’s role?

Sand mining causes degradation of the river basin and has other environmentally hazardous consequences. Due to the high demand for sand, and the tendency to overmine, the practice is regulated by the state government in Punjab.

How huge is it in Punjab?

Punjab’s estimated demand for sand is said to be 2 crore tonnes annually. Officials estimate the business in Punjab to be worth Rs 3,000 crore annually. A tipper truckload of 35 tonnes fetches anywhere between Rs 10,000 and Rs 25,000, depending on supply. When construction activity picked up in Punjab in the post-terrorism era, so did the sand mining business. But it was only in 2005-2006, with the real estate boom and new residential developments, that there was new spurt in demand for sand.

What is the process by which mines and quarries are allotted to miners, and what does the government earn out of it?

The state government is expected to make Rs 500-600 crore from the sand mining business this time. Last year the revenue was Rs 35 crore as the previous government had opted for a system of reverse bidding, in which the lowest bidder gets the mine. This time, the new government adopted a system of progressive bidding, giving the contract to the highest bidder. The government put on e-auction 97 sand and gravel quarries on May 19 and 20, and going by the high bids, announced it would net Rs 1,026 crore. But when it came to putting down the money, contractors deposited the security amount for only 50 mines. Still the government was able to make Rs 310 crore from the auction. The rest of the mines will be re-auctioned on June 11.

Who are the people engaged in the sand mining business?

Over the years, the regulation and licensing of mines has spawned a system of political patronage and rent-seeking. The sand mining business in Punjab is seen as dominated by those who have strong political contacts. It goes hand in hand with the transport and trucking business. Several politicians are known to have links with those in the sand mining business; some are even said to own sand businesses through family members or relatives. The existence of “the politician-sand mafia nexus” has been enough of a political issue for political parties to promise they will break it.

What “sand mafia”?

Those in the business are known to have formed cartels to preempt competitive bids for mines while arriving at arrangements among themselves on the price at which sand will be sold in the market. During the two terms that the SAD-BJP was in power, the annual revenue from the allocation of sand mines was not more than Rs 40 crore in any year. Under the auctioning system prevalent then, the mines would be allotted to the lowest bidder, ostensibly to keep the market price of sand low. But the prices skyrocketed as cartels determined both the supply and the rates. On the other hand, the Congress regime decided to introduce e-auctioning of mines, and a system of “progressive bidding” through which mines would be allotted to the highest bidder. The system netted the government Rs 200 crore, but there are concerns that because of the high auction prices, those in the business will have to charge high prices in the market to recover their money. The government says it will ensure that there is a supply of 3 crore tonnes of sand, more than the demand, so that the price remains reasonable. There are also concerns that the high auction prices will incentivise illegal mining.

How does illegal mining take place?

The department of mines auctions 102 spots. These are notified by the Ministry of Environment keeping in mind the effect on the flow of the river when there is water in it, on the river banks and the depth of river. But it is well known that sand miners do not restrict themselves to their allotted mines or notified areas. There have been instances of expanding the area of the mine, or tapping riverbeds that are not included among the “auctionable” mines, and of mining during the monsoon months, when the activity is officially banned.

What is the recent row around the sand mining auction about?

The government had promised its e-auction system would ensure transparency and weed out cartels and break the nexus between politicians and the sand mafia. But after the auction, it emerged that individuals linked to Power and Irrigation Minister Rana Gurjit Singh had won at least three mines. One of them, who was formerly employed as a cook in Rana Sugars Pvt Ltd, won a contract by bidding Rs 26 crore, another put up Rs 9. 21crore. Rana Gurjit has denied any links to these individuals, and says they were associated with him in the past but now have their own businesses. His poll affidavit displays transactions between his businesses and those in which his former employees are now “directors”. Chief Minister Amarinder Singh has set up a judicial inquiry into the allegations of “impropriety” against the minister.

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