Land and mineral rights must belong to private people

The multi-billion dollar Vedanta bauxite mining project in Orissa has been been mired in controversy. Recently the Ministry of Environment and Forest issued show cause notice to the company for violating various provisions of the Forest Rights Act, and suspended their mining permission. Following is my latest oped on this issue. I look at the debate from the perspective of land and mineral rights, and say that these should belong to the people who live there. This article was published in the Wall Street Journal under the title, "Landing India's Next Big Investment", on September 8, 2010.

Endemic poverty amid environmental riches has been the fate of most indigenous tribes in India for generations. There are perhaps 90 million so-called "tribals" in India today, 80% of whom live in the central belt from the states of Orissa in the East to eastern Gujarat in the West, to Madhya Pradesh in the North and Andhra Pradesh in the South. Most of these people live in and around forested areas and are extremely poor. And a recent government decision to block a British company's investment shows why they're likely to stay that way.

Last month the central government suspended London-based Vedanta's permission to mine bauxite in Orissa and issued a "show cause" notice for violation of forest laws. The committee that reviewed the proposed $8 billion project noted that the lifestyle of two tribes—the Dongria Kondh and Kutia Kondh—might be disrupted by interruptions to water supplies and other natural resources. The committee also said the tribes consider the hills sacred, although the exact location of the holy site isn't clear. Vedanta's co-investors withdrew their support for the project on possible human-rights violations.

Never mind that these two tribes consist of 8,000 people, of whom about 20% are believed to have been adversely affected. Or that the mining project lies in the 250-square-kilometer Niyamgiri Hills—of which only seven square kilometers of one hilltop were supposed to be mined. Or that none of the tribes were expected to be displaced.

The problem is not necessarily that tribals might object to this particular mining project. Rather, the trouble is that a lack of clear property rights makes it impossible for anyone to determine whether the tribals truly do object—or whether other special interests are cloaking their own causes in the mantle of tribals' rights. This lack of clarity helps crony capitalists to muscle in with state patronage.

Under colonial rule, the British failed to recognize the land rights of tribal people, denying them the ability to own or sell their property or profit from its resources. Now, some 60 years after independence, tribals still don't legally own their property, either individually or as part of a village's common land holdings. The problem is compounded by the fact that minerals and other underground natural resources by law belong to the state, not to the people who work and live on the land.

One result is that an investments like Vedanta's become more politicized than they otherwise would. Where mining interests seek ready access to resources, anticorporate activists find an easy target to campaign against. But if individual tribals were granted land ownership rights, they could decide for themselves whether to accept a development project or not. Rather than being forced off their property, thanks to the abuse of eminent domain by the government—as often happens—they would be able to shape their own destiny. By the same token, they would be free to pursue projects they truly wanted. Only then could land owners and capital providers negotiate as equals and explore areas of mutual interest.

Delhi is trying to strike a balance, but as usual the politicians may make matters worse. The government is considering a draft mining law that proposes to give 26% equity of mining projects to local populations. The mining industry is vehemently opposed to this idea, mostly because giving equity may lead to greater uncertainty over management control. In addition, the tribal population would have to share the risks associated with such projects that stem from the wide fluctuations in commodity prices. Most importantly, though, without clear ownership and objective valuation of assets, it would be impossible to determine the value of the local people's equity holdings, leading to possible legal disputes.

Rather than muddy the waters in this way, Delhi would be better served to consider more fundamental changes. It is time to recognize not only individual and community land rights, but the right to the minerals lying under that land too. In addition, there must be a greater recognition of property rights over village common land and the associated forests on which its residents depend.

There are already precedents for doing this. In the United States, for instance, the right to minerals, including oil and gas, belong to the land owners. These mineral rights can be sold, leased or subdivided, and these mineral rights can also be separated for different minerals found in the same property. An estimated one million landowners in America enjoy these rights.

The Dongria Kondh tribe, at the heart of the present controversy in Orissa, is officially classified as "primitive." Its members practice slash-and-burn agriculture and are among the country's poorest citizens. They are too deprived—socially, economically and educationally—to be able to reach the rarefied heights of salaried employment in India; only 10% of India's workforce has that privilege. The current Chief Justice of India once pitied them as "living on grass."

How ironic, then, that because of the archaic laws of India, promoters of a multibillion-dollar mining project cannot directly negotiate with the people who are on the land. And how tragic that this project's closure is being celebrated by NGO activists as a "victory." It is just the opposite.