DMF funds still focused on infrastructure, only three states meet priority sector targets

DMFs, meant to be non-profit trusts, were mandated to be set up through an amendment to the Mines and Minerals (Development and Regulation) Act in 2015, and since then have been established in 645 districts across 23 states. The money coming to the DMFs are to be utilised for development work within the districts.

The Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY), also unveiled in 2015, provides guidelines for utilisation of these funds. Originally, it asked the state governments to allocate at least 60 per cent of these funds for ‘high-priority sectors’, which included drinking water supply, education, health and sanitation, pollution control and skill development. This percentage was raised to 70 per cent in the revised guidelines issued last year.

An assessment of the first ten years of functioning of the DMFs and PMKKKY by iFOREST, an independent non-profit environmental research and innovation organisation, shows that only three states — Jharkhand, Gujarat and Goa — had managed to achieve 70 per cent allocations for the high-priority sectors. Odisha was almost there, having allocated 69.7 per cent of its DMF funds to these sectors. Four more states — Chhattisgarh, Karnataka, Bihar and Jammu and Kashmir — had allocated more than 60 per cent, aligning themselves with the original guidelines.

The iFOREST assessment shows that the biggest chunk of DMF money – about 30 per cent – across all states was spent on infrastructure creation, on construction of roads, bridges and buildings. This is followed by education (20 per cent), drinking water (15.7) and health (8.9). A total of 11 states, out of 23, utilised more than 30 per cent of the funds on creation of physical infrastructure, four of them spending more than 40 per cent.

More than 1.03 lakh crore rupees flowed into the DMFs in the last ten years, of which about Rs 88,000 crore have been allocated for various programmes, and more than Rs 41,000 crore already utilised. These funds have become the main vehicle for financing development works in the mineral-rich states, many of which also happen to be relatively poor. However, the utilisation record in some of these states are not very high.

“Gujarat has the highest spending of 67% of the accrual, followed by Chhattisgarh with 64%. However, utilisation in some of the major DMF states like Jharkhand, Odisha and Rajasthan are quite low,” the assessment said.

“Overall, the pattern of infrastructure-heavy investments does not align with the objectives of the DMF. The prime focus of DMF and PMKKKY is to alleviate poverty and deprivation, which requires a balanced investment in human resources and infrastructure. However, this balance has not been achieved in any district… The other problem is that this investment pattern of locking resources into capital-intensive projects is limiting the ability of DMFs to address evolving community needs. In the future, either the DMFs will have to provide funds to maintain these infrastructure or many of them are likely to go defunct,” it said.

With the demand for minerals expected to increase, iFOREST estimated that the DMFs would be receiving anywhere in the range of 2.5 to 3 lakh crore rupees over the next ten years.

“it is crucial to establish strong institutional mechanisms to ensure efficient fund utilisation, proactive financial planning that integrates local community needs and aspirations, and effective monitoring mechanisms,” it said.

The assessment said the DMFs needed to improve their governance structure, and recommended that those handling larger amounts should appoint CEOs to ensure better utilisation of these funds. It also suggested that DMFs finalise five-year perspective plans for using the money in a more gainful manner.