A storm is brewing on the climate diplomacy front that India needs to navigate carefully to avoid becoming a fall guy. The issue at hand is the pledge by countries to achieve “net zero” emission by the mid-century. Over 120 countries have already announced their intention to achieve carbon neutrality by 2050. China intends carbon neutrality before 2060, and the US is considering a 2050 pledge. Being the third-largest emitter, there is pressure on India to announce its commitment as well.

Net zero or carbon neutrality means that the amount of CO₂ produced by a country is balanced by the amount removed from the atmosphere. According to the Intergovernmental Panel on Climate Change (IPCC), to limit the global temperature increase to 1.5°C, global net CO₂ emissions should decline by about 45% by 2030, reaching net zero around 2050.

There is considerable scepticism around net zero in India. Many argue that net zero is not equitable and fair as it does not differentiate between developing and developed countries in sharing the burden of mitigation. Another argument is that it will limit India’s development potential. Some also criticise mid-century net zero as allowing uncontrolled emissions today while relying on uncertain technologies to offset emissions in the future. Finally, many net zero pledges are premised upon trading and offsetting emissions, allowing the rich to continue emitting and buying their way out.

There is some merit to the above scepticism. Historically, developed countries have shifted the goalposts on climate action and reneged on financial and technological promises to developing countries. However, we cannot shy away from net zero, as declaring a carbon neutrality target is inevitable for every country to meet the 1.5°C goals; the only question is when and how.

The first step for India to decide the contours of net zero is to stop reacting to terms set by developed countries. In three decades of climate negotiations, we have primarily been a reactive party, not a proactive one shaping the discussion. With net zero as well, we face a choice – either reject the idea citing equity and fairness or embrace and remould it to achieve climate goals and secure our developmental space. I strongly believe we have an opportunity to develop a fair, ambitious and effective consensus on net zero. Let me propose a five-point agenda that India can consider to set the terms for future global action.

First, net zero should be built on self-differentiation, a cornerstone of the Paris Agreement. It is a no-brainer that if the global net zero deadline is mid-century, then the developed countries’ deadline will be 2040. High-emitting emerging economies like China will have to follow soon and reach net zero before 2050. Countries like India with per capita emissions below the global average will get a little more time – until 2060.

Second, the net zero target has to be flexible. Newer disruptive technologies would allow us to decarbonise faster at a much lower cost than what can be envisioned today. Take, for example, India’s solar energy target. From a modest 20GW in 2010 (enhanced to 100GW in 2015), we are now targeting 450GW of renewables by 2030, largely from solar. That is a 15-fold ambition enhancement within a decade. Countries should therefore revisit their net zero targets every ten years to firm up their commitments.

Third, while net zero is the ultimate goal, the Nationally Determined Contributions (NDCs), due every five years, are the means to achieve the goal. IPCC is very clear; an ambitious 2030 target must accompany net zero. So, countries pledging net zero must also announce enhanced NDCs for 2030.

Fourth, net zero has to be legally binding. Less than ten countries have enacted domestic law on net zero; the rest have made pledges or policy statements. While policy pronouncement is important, compliance can only be assured through a law. This is especially necessary for the US, where climate ambition shifts quickly with change in the political landscape. If the Biden administration is serious about net zero, it should get a law through the US Congress.

Finally, and most importantly, setting a net zero target will not by itself guarantee positive and equitable social and economic outcomes. The rapid transition required in the next 2-3 decades will disrupt the economic and social fabric of fossil-fuel dependent regions. Hence, the net zero targets must be paralleled by an international framework on Just Transition.

Achieving net zero over the next 3-4 decades is very much possible for India. We are developing at a time in history when low/ no-carbon technologies will grow exponentially. A well-designed net zero plan will be an opportunity for us to pole vault to a green future. While there will be an extra cost, studies indicate that these will be modest and compensated by lower adaptation costs and reduced loss from extreme weather events. Besides, it will have enormous co-benefits in reducing air and water pollution and improving forest and soil quality, contributing to overall environmental improvement and human well-being. By announcing our net zero commitment, we will also send a clear signal that we are open to global finance and technology support for a green and just transition.

The bottom line is we are one of the most vulnerable countries to climatic disruptions. It is, therefore, in our interest that a serious effort is made globally to meet the 1.5°C goals. In this endeavour, we can either be a bystander or a leader.

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Political Summary

Two 5-year cycles currently drive the implementation of the Paris Agreement (PA): one of communicating national targets (“Nationally Determined Contributions” NDCs) and one of taking stock of global efforts. In order to complete the ambition mechanism of the PA, which is critical for its full operationalisation and the achievement of its objectives, another 5-year cycle, the “Glasgow Ambition Cycle” (GAC), aimed at ratcheting up the collective ambition of NDCs, has been proposed. It is gaining significant traction and appeal for adoption at COP 26 in Glasgow under negotiations on Common Time Frames (CTF, see Ambition Cycle on course to land in Glasgow).  The GAC provides an elegant and non-controversial solution to the sticking options currently being negotiated, and is meant to start in 2025 when countries would be requested to:

• communicate (at least) a 2035 NDC (‘with a time frame up to 2035’);
• re-visit any NDCs communicated earlier to see whether, in light of changed circumstances, their ambition could be increased; and
• repeat these two steps, ceteris paribus, every five years – thus in 2030 they would be: communicating a 2040 NDC and revisiting (inter alia) the 2035 NDC communicated five years earlier, and so forth.

As recently remarked by Marianne Karlsen (Chair of the UNFCCC/PA Subsidiary Body for Implementation): “Parties are increasingly realizing the importance of the issue [CTF] to the overall dynamics and well-functioning of the Paris Agreement. Of course, it is important to keep in mind that CTF is very much a political issue because establishing timeframes often involves parliaments and cabinets. So, this has to be something that politicians also need to get on the radar to work with.”^[1]

This is why this OCP blog post takes a look at domestic considerations and demonstrates that the GAC is flexible enough to be accommodated and workable in three key Parties: India, China and the European Union.

India. India has a well-established revolving five-year electricity planning cycle consisting of Electric Power Surveys (EPS) and National Electricity Plans (NEP). The Surveys involve annual demand projections for the next ten years as well as long-term (‘perspective’) projections for 15- and 20-year time horizons. The Plans contain a detailed growth strategy, including investments in generation, transmission, and distribution, for the next five years and the roadmap for the subsequent five years.

The 20th EPS, to be published in 2022, will contain yearly projections of electricity demand till 2030 and long-term projections for 2035 and 2040. The 4th NEP will be available in 2023; it will contain a detailed plan for 2022-27 and a perspective plan for 2027-32. As the electricity sector is the single largest source of GHG emissions in India, accounting for 47 per cent of the country’s total emissions, its planning cycle can be argued to be already in conformity with the GAC, and therefore in principle, the GAC can be accommodated in India’s NDC communication cycle, given the information in the 20th EPS/4th NEP.

China. China’s overall socio-economic development policy in the first half of the 21st century is dominated by two ‘Centenary Goals’; these mark the centenary of the Chinese Communist Party in 2021 and the centenary of the People’s Republic in 2049. As the mid-point between these two centenaries, 2035 has received special attention in China’s current policy making. The deliberations for the 14th Five-Year Plan (2021-25) include, for the first time, a longer-term vision with a 2035 target, which will set the development pathways for the next 15 years. This combination of short-term and long-term targets in China’s policy making is significant for global climate policy, not least because it is perfectly consistent with the proposed Glasgow Ambition Cycle.

The European Union. A key domestic consideration in the EU for determining the timeframe of climate targets is that implementing legislation can take up to 5 years to be adopted. The 2020 communication of a 2030 NDC update shows that a 2025 communication of a 2035 NDC should (in principle) be possible, even if a 2040 timeframe remains the preferred option among some of the key domestic constituents. Given that the Paris Agreement does not preclude the communication of multiple NDCs, there is no need to choose between the two options: the EU can communicate both a 2035 and a 2040 NDC in 2025, and thus take into account all domestic preferences and do so in a manner consistent with the Glasgow Ambition Cycle. The communication of a 2035 in order to facilitate a harmonisation of the GAC should not be seen as a mutually exclusive option, but rather a demonstration of political flexibility that will not prejudice the substantive essence of the EU’s overall ambition. 

The Case of India: Electric Power Surveys and National Electricity Plans

India has an elaborate system for developing a National Electricity Plan every five years.[2] This system has been codified by an act of parliament – the Electricity Act of 2003 (‘the Act’). The Act obligates the Central Electricity Authority to formulate policies and plans for the development of the electricity sector, and to conduct and publish an Electric Power Survey (EPS) every five years to forecast both the country’s electricity demand and the contribution of various sources of electricity to meet that demand. The Act also stipulates the preparation of a National Electricity Plan (NEP) every five years, in accordance with India’s National Electricity Policy.

The EPS forecasts, every five years, the electricity demand for the entire country and for each State and Union Territory in the short, medium, and long term. Year-wise electricity demand projections are made for the next ten years, while long-term (perspective) demand projections are carried out for 15- and 20-year time horizons. So far, nineteen EPS have been published, the latest one in January 2017. 

The 20th EPS will be published in 2022. It will contain:

• Annual electricity demand projections for each State, Union Territory, Region, and All India in detail for the years 2021 to 2031 (see figure above);^[3]
• Electricity demand for the terminal years 2036 and 2041.

The NEP contains a five-year detailed plan and a 15-year perspective plan. It includes:

• Short-term and long-term demand forecast for different regions;
• Suggested areas/locations for capacity additions in generation and transmission, keeping in view the economics of generation and transmission, losses in the system, load centre requirements, grid stability, security of supply, quality of power (including voltage profile, etc.), and environmental considerations including rehabilitation and resettlement;
• Integration of possible locations of capacity additions with the transmission system and development of the national grid – including the type of transmission systems and requirement of redundancies;
• Different technologies available for efficient generation, transmission, and distribution; and,
• Fuel choices based on economy, energy security, and environmental considerations.

The latest (Third) NEP was published in January 2018. It contains a review of the previous five-years (2012-17), a detailed plan for the next five years (2017-22), and a perspectives plan for 2022-27. 

The Fourth National Electricity Plan will be available in 2023. It will contain a detailed plan for 2022-27 and a perspective plan for 2027-32.

From the above, it is clear that a revolving five-year planning cycle for the electricity sector is well-established in the country. As the electricity sector is the single largest source of GHG emissions in India (accounting for 47 per cent of the country’s total emissions, including LULUCF^[4]), its planning cycle could become a basis for India’s NDC communication cycle.

The Case of China: Enhanced Five-Year Planning

At the 15th National Congress of the Chinese Communist Party (CCP) in 1997, President Jiang Zemin introduced two ‘Centenary Goals’ to guide the socio-economic development in China. The first goal refers to the centenary, in 2021, of the founding of the CCP, with the Centenary Goal of building a moderately prosperous society in all respects; the second one referring to the centenary, in 2049, of the founding of the People’s Republic of China, with the goal for China to become a basically modern socialist country.

At the 19th CPC National Congress in 2017, President Xi Jinping brought forward this goal to 2035 as a new mid-term goal, with the second Centenary Goal changing to China becoming fully modernized by 2050.

Three years later, in October 2020, President Xi Jinping introduced, for the first time, a longer-term vision – a 2035 development target – in the course of the discussions on the 14th Five-Year Plan (2021-25) at the 19th meeting of the CPC Central Committee.

This new combination of short-term and longer-term targets in China’ policy making is significant not only for China’s carbon emissions peaking and carbon-neutrality targets, but also for the international climate regime. 

At the time of writing, some provinces, autonomous regions, and municipalities have published their 14th FYP and 2035 long-term policy recommendations. Among these, the important mid-

and long-term policy goals related to climate change include (but are not limited to): clarifying the carbon emissions peaking action plan, limiting coal use, increasing the share of renewable energy sources in the energy mix, promoting the intelligence and digitalization of energy development models, and developing green financial service systems. These targets will become the backbone of climate policy making at regional levels in the near future.

Since the formulation of its first five-year plan 70 years ago, China has completed thirteen FYPs, and FYPs will continue to provide guidance to the socio-economic development in China, despite debates on the effectiveness of such administrative economic planning. FYPs fit well with the proposed Glasgow Ambition Cycle, particularly in conjunction with the new longer-term 2035 planning horizon.

In short, the establishment of the 2035 target enables China to play an important role in international climate change negotiations. This is crucial for the ability of China’s own adaptive measures to engage with climate change impacts domestically, and also for the joint efforts of the international community to combat climate change. Combining the carbon emissions peaking and carbon-neutrality timelines, China has the opportunity to demonstrate its contribution to climate change mitigation and also its leadership, in the near future.

The Case of the EU: The Issue of Implementing Legislation

The Glasgow Ambition Cycle crucially requires the communication of a 2035 NDC by 2025. Could this be a realistic option for the EU? A practical way to assess possibilities is to look at precedents – in this case at EU past communications under the Paris Agreement (PA).

On 6 March 2015 (see Table 1 below), the EU communicated their Intended Nationally Determined Contribution (INDC) with a ‘point target’ of emissions in 2030 being at least 40 per cent below 1990 levels, which became its initial NDC on 5 October 2016, when the EU ratified the PA.

This was based on an EU-wide emission trajectory with annual figures from 2021 to 2030, formulated and adopted by EU heads of government in 2014. The subsequent formulation and adoption of the legislation required for implementing the 40 per cent target took almost five years, beginning in July 2015 and ending in December 2020 with the setting of the final 40 per cent target trajectory.

In March 2020, the Commission promulgated the European Climate Law [ECL], which not only mandates the EU to be ‘climate-neutral’ by 2050, but also “proposes the adoption of a 2030-2050 EU-wide trajectory for greenhouse gas emission reductions”[ECL], and five-yearly assessments of “the consistency of EU and national measures with the climate-neutrality objective and the 2030-2050 trajectory”[ECL], synchronized with the Global Stocktakes of the Paris Agreement.

On 17 December 2020, the EU communicated an update of their initial NDC with a new, more ambitious target of at least 55 per cent below the 1990 level for 2030 emissions and – according to the EU Climate Action Progress Report, November 2020 (see also Figure 1) – the Commission is currently determining the annual emissions allocations (AEAs) for each country for the years 2021 – 2030, to take into account the updated, more ambitious, 2030 target.

What is to happen next? In a first instance, new implementing legislation for the 55 per cent target will have to be adopted, and it is expected that this will take (at least) until 2024, which means that in practice the implementation of the updated 55 per cent NDC is unlikely to commence before 2025.

Assuming the adoption of the ECL by 2022, the next milestone will be the first of the ECL-mandated assessments in 2023. Following the pattern seen in the run up to the 2015 communication of the (I)NDC, it stands to reason – not least on the basis of the position of the European Council (see Box 1) – that this will be followed by the formulation and adoption of a second ten-year trajectory (2031-40, see Figure 2), presumably based on the 2050 net-zero trajectory mandated in the ECL. 

According to Art. 4.9 of the PA, all Parties have to communicate an NDC in 2025. The key question in the present context is about what timeframes the EU could realistically consider in light of domestic considerations?

One of the key domestic constraints, the time it takes to adopt the required implementing legislation (up to 5 years, as mentioned above), for one rules out another update of the 2030 NDC.

Given the INDC precedent, one option clearly is the communication of a 2040 NDC. But, to be sure, the 2020 communication of the updated 2030 NDC equally provides a precedent for the option of communicating a 2035 NDC, which seems to be the preferred option of a number of Member States,[5] and is consistent with the GAC. Fortunately, Art. 4.9 allows for multiple NDCs to be communicated simultaneously, so that there is no need to choose one over the other. 

In short, keeping in mind the domestic legislative constraints, it is possible (as illustrated in Figure 2) for the EU to include the communication pattern set in Paris in a cycle that would be consistent with the GAC by communicating both a 2035 and a 2040 NDC in 2025, updating the 2040 NDC in 2030, and communicating a 2045 NDC and the 2050 (‘net-zero’) NDC in 2035.

The authors would like to acknowledge, with gratitude, feedback received (in alphabetical order) by Annika Christell, Kishan Kumarsingh, Geert Fremout, and Artur Runge-Metzger.

^[1] Source: In conversation with SBI and SBSTA Chairs ERCST.

[2] References:

• The Electricity Act, 2003 (available at http://www.cercind.gov.in/act-with-amendment.pdf).
• 19th Electric Power Survey, 2017 (available at https://cea.nic.in/wp-content/uploads/2020/04/summary_19th_eps.pdf).
• National Electricity Plan, 2018 (available at https://cea.nic.in/wp-content/uploads/2020/04/nep_jan_2018.pdf).

[3] Note that strictly speaking, the projections are made for financial years, starting in April and ending in March of the following calendar year. However, to avoid cumbersome notation, the calendar year of the initial nine months is here used to designate the financial year in question, i.e., ‘2020’ instead of ‘FY 2020-21’.

[4] MoEFCC. (2018). India: Second Biennial Update Report to the United Nations Framework Convention on Climate Change. Ministry of Environment, Forest and Climate Change, Government of India.

[5] See Appendix 3 in Enhance Climate Ambition in 2020: Here’s looking at EU, kid!

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One of the most significant amendments in this regard is taking decisions on matters of DMFs. The Government had instituted DMF by amending the MMDR Act in 2015 to improve the social responsiveness of the mining sector. As specified in the law, the objective of DMF is to work for the interest and benefit of areas and people affected by mining and related activities.

The State Governments were entrusted with the primary responsibility of setting up DMFs in every mining district (of the respective state), through a notification.  At the same time they were also vested with the power to prescribe the composition and functioning of DMFs.

The 2021 Bill proposes to increase the Centre’s say on matters of DMF. It has been specified that the “Central Government may give directions regarding composition and utilisation of fund” by the DMF.

The question is, what does this mean for DMF implementation, if the Bill becomes a law.

To answer this, it is important to consider what has been going on with DMFs in various states, and whether a direction from the Centre is necessary on its composition and functioning.

The MMDR Amendment Act 2015, under which DMF has been instituted, specifies that its composition and functioning, should be guided by three important people-centric laws. These include, the constitutional provisions as it relates to Fifth and Sixth Schedules (for governing tribal areas), provisions of the Panchayats (Extension to Scheduled Areas) Act (PESA), 1996, and the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 (in short the Forest Rights Act).

However, the DMF Rules as developed by most State Governments frustrates this. This has also been affecting DMF implementation.

First let us consider the composition of DMFs. Barring a handful, DMFs in most states/districts are dominated by officials and political members. This is true even for DMFs in Scheduled districts. There is negligible representation of Gram Sabha members, or general mining-affected people in the DMF body. This has resulted in top-down decision making. In most top mining districts, the affected community for whom DMFs have been developed, barely have any knowledge of it, or have any say about how it operates.

Second is the issue of DMF functioning and fund use. In nearly six years time, while more than Rs. 45,000 crores have accrued to DMFs across various districts in India, there is little perceptible change on ground with respect to development indicators, and basic factors of human well-being.  

A major reason for this is lack of planning. Barely any DMF Trust has developed a DMF plan to use the funds in a targeted manner, and as per the need of the people who are the beneficiaries. This has led to ad-hoc decisions on fund use, without prioritizing issues where intervention is necessary. Just one example shows this clearly. While poverty and livelihood are critical issues for the mining-affected people, no substantial investment has happened. In the first five years, most districts have spent only 0-4% of  the DMF budget towards this. Equally neglected areas have been child development, healthcare etc. in many districts. At the same time, there has been no significant effort for delineating the mining-affected areas, or identifying the mining-affected people.

The Centre’s intervention, which the 2021 Bill now suggests, presumably can help to improve DMF implementation, if the right directions are given. The Pradhan Mantri Khanij Kheshtra Kalyan Yojana (PMKKKY) guidelines must also be revised considering the current challenges with DMFs.

What is urgently required for the states, is to revise their DMF Rules. This is where the Centre can issue necessary directions. This can include directions on:

• Revising the composition of DMF to include Gram Sabha members from directly mining-affected villages/panchayats (or ward members) in the DMF Governing Council. At least 10% of the members should be from directly affected villages (or wards if an urban area).
• DMF planning, including preparation of annual action plans, and perspective plans, by engaging experts.
• Identifying and notifying the beneficiaries (the mining-affected people) and delineating the mining-affected areas to improve effectiveness of fund use.
• Setting up of DMF office in districts for purposes of coordination, planning, monitoring, and public disclosure of information. There is already 5% of DMF funds available for this.
• Establishment of a state-level monitoring and co-ordination committee, for monitoring and co-ordination of DMF operations in various districts.
• Improving accountability by information disclosure in public domain, and mandating both financial and performance audits of DMF Trusts.

The bottom line is, the Centre’s increase in power to intervene on DMF implementation, should not mean more top-down control. The directions must uphold the spirit of DMF, which is of a people-centric institution.

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The Montreal protocol and all its subsequent amendments focused on transitioning away from ozone depleting gases. Hydrofluorocarbon (HFC) gases emerged as a stop-gap-solution for cooling applications. While HFCs are not ozone depleting they have a fairly high global warming potential (GWP). The Kigali Amendment addresses this by setting a timeline for phase-down of high-GWP HFCs. A forward-looking strategy at this time would be to avoid making another pitstop for transition refrigerants but instead make a leapfrog to climate-friendly refrigerants.  

Alternatives for high-GWP refrigerants have either been low-GWP synthetic HFCs, hydrofluoroolefins (HFOs) and their blends or natural refrigerants such as ammonia, carbon dioxide, hydrocarbons (HC) and water. Multinational companies are promoting synthetic refrigerants as drop-in replacements, allowing for continued use of existing equipment. A critical drawback of synthetic refrigerants is their detrimental impact on the climate and/or the environment. For instance, many ‘low-GWP’ HFCs have GWP values of greater than 100. The breakdown products of HFOs like Trifluoroacetic acid, on the other hand, have been found to be eco-toxic and accumulate in water bodies. Additionally, most synthetic refrigerants are fiercely guarded by patents, making them expensive.

Natural refrigerants, on the other hand, have GWP values as low as 10 and are substantially cheaper than synthetic alternatives. Other widely discussed advantages of natural refrigerants include their cost saving capacity both in terms of energy efficiency and lower maintenance costs. A major hindrance to the widespread use of natural refrigerants is their flammability and/or toxicity relative to HFCs. Technological advances have enabled the safe use of HCs and ammonia for cooling applications albeit in applications requiring low amounts of refrigerants. Widespread use of natural refrigerant-based cooling as well as expanding their applications requires safety standards and skilled labour for installation and maintenance.

In 2020, the Bureau of India Standards (BIS) adopted IEC 60335-2-40:2018 and Code of Practice for design and installation of the closed-circuit ammonia systems (MED 3 (14430)). Both of these standards target natural refrigerants, aiming to make them safe to use in all types of cooling applications.

The adoption of IEC 60335-2-40:2018 is a significant move as it allows for greater charge sizes of refrigerants like HC but with more stringent safety measures. The standard may help with widespread use of Propane (HC 290) as a refrigerant in room air conditioners and perhaps even for commercial applications.

BIS’s decision to publish the code of practice MED 3 (14430) is a critical step as it prescribes India-specific standards to cover all ammonia refrigeration applications. Notably, the Association for Ammonia Refrigeration (AAR) played a pivotal role in the creation of these standards to meet specific design/testing requirements for Indian conditions. With the implementation of these standards, ammonia refrigeration systems in India will be energy-efficient, sustainable and most importantly safe.

With safety standards of natural refrigerants in place, the way forward from here would be to promote their use by the Indian manufacturers. Towards this, the Government of India can roll-out a ‘Make in India’ program for natural refrigerant-based cooling appliances. This will create a large number of jobs in manufacturing and for installation and maintenance of these units. India can also play a major role in promoting the use of natural refrigerants in other developing countries of Asia and Africa as part of south-south cooperation.

References:

treaties.un.org/Pages/ViewDetails.aspx?src=IND&mtdsg_no=XXVII-2-f&chapter=27&clang=_en

Ivan, R. E. (n.d.). Kigali Amendment. Regulatory framework, benefits and policies for ratification, UNIDO. www.unido.org/sites/default/files/2017-06/13June_KigaliAmendment_RegulatoryFramework_0.pdf)

McLaughlin, C. (2 July 2018). Germany warns R1234yf could cause harm to drinking water. R744. r744.com/articles/8395/germany_warns_r1234yf_could_cause_harm_to_drinking_water

Greenpeace. (n.d.). Natural Refrigerants: The Solutions.  www.greenpeace.org/usa/wp-content/uploads/legacy/Global/usa/planet3/PDFs/hfc-solutions-fact-sheet.pdf

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The ongoing pandemic has certainly come as a harsh reminder of how important it is to strengthen our economic base, and advance livelihood opportunities that are less vulnerable to social disruptions. Appropriate policy measures to ensure this is the need of the hour. 

In India, we already have a number of laws and regulatory provisions, that have strong underpinnings for improving local economy and reducing vulnerability of local communities. 

District Mineral Foundation (DMF) as instituted under the Mines and Minerals (Development and Regulation) Amendment Act, 2015, is one of the most significant ones in this regard. 

DMFs are in place in 583 districts, spread across 21 states of India. The funds of DMF, that come as a mandatory payment by miners operating in these districts, currently stands at nearly Rs. 40,280 crores. So far, about 41% of this money has been spent on various developmental works, as per latest government records. 

As per the law, creating sustainable livelihood opportunities, and improving people’s employability through skill development, are among the ‘high priority areas’ of DMF investments. Other priority sectors include, healthcare, education, women and child welfare, clean water supply, sanitation etc. How the money can be spent on these issues, must be determined in a planned way through a bottom-up process. What these essentially mean, is that, if implemented well, DMFs have huge potential to create income opportunities that are sustainable and secure, and improve overall developmental outcomes of some of the country’s poorest and most vulnerable people. 

Tangible asset creation will lead to misplaced DMF investments

As a component of the mining reforms, the Ministry of Mines has proposed to revise the rules and guidelines pertaining to DMF, to “improve the focus of DMF funds towards creating tangible assets” in mining-affected areas. However, this is a highly problematic proposition and will create huge scope of fund misuse. 

The focus on ‘creating tangible assets’, will make DMF any other development programme. This is not why DMF was developed. DMF has been instituted with the precise purpose of improving the lives and livelihoods of mining-affected people and areas. The law and guidelines (the Pradhan Mantra Khanij Kheshtra Kalyan Yojana), make it clear that this will require planned investments in both hard and soft resources.

However, if creation of tangible assets is prioritized, it will lead to heavy spending on physical infrastructure, and undermine the importance of investing on soft-resources, which are crucial for improving various development outcomes. For example, in mining-affected areas of most districts, a primary reason for poor healthcare is not that we do not have buildings; there is a severe shortfall of doctors, staff nurses, laboratory technicians, medical equipment, ambulances etc. Low income among people and lack of health insurance, makes it difficult for them to access private or well-equipped facilities. Similarly, for education, the biggest reason of high dropouts or poor learning outcomes among children is that there is a shortfall of good teachers, regular staff, and other facilities in the schools. 

The penchant for tangible assets will also severely undermine the scope of investments on livelihood, the key ‘purpose’ of the reforms. The trend of DMF investments over the past 5 years shows that, most states and districts have spent the least on livelihood and income generation components for local communities in the rush to ‘build’ something. The allocation towards this, accounts for only 0-4% of the total budget, while infrastructure development in all sectors, including major roads and bridges, account for the major share of investments. 

If the Government wants to improve DMF implementation, it should provide clear directions on DMF administration, planning and investments, to ensure that DMF funds are effectively used to benefit the people who need it most, and in the best possible way. Here are six crucial points on which directions need to be given:

1. DMFs must identify the mining-affected people, the beneficiaries of this fund. Not identifying them until now has been one the major drawbacks of DMFs, and has left out some of the most distressed people.
2. In most states and districts, there is no clear guideline till date to identify and delineate directly and indirectly mining-affected areas. This task must be prioritized to make investments targeted.
3. Districts must have proper and dedicated administrative set-up for DMFs.  This will help in DMF planning and co-ordination, which is necessary to optimize DMF fund use. There is already scope of using up to 5% of DMF budget for this.
4. At least 60% of DMF funds must be used on directly mining-affected areas, alongside on ‘high priority’ issues.
5. To prevent the scope of fund mis-use and improve development outcomes, a cap should be prescribed for the percentage of DMF funds that can be spent on infrastructure development in any sector. The Government has deliberated on this earlier, and a 20%-30% cap can be prescribed. 
6. Finally, there is no alternative to DMF planning. Ad hoc directions cannot resolve the problem with DMF investments. Every DMF must develop annual and perspective plans considering the local context. Our Constitution and governance mechanisms have repeatedly recognized the merit of local level planning. 

DMF Rules and guidelines certainly require a re-look and reform. The Ministry held a meeting on this in January 2019, and recognized the need of a much comprehensive set of directions that states and districts should follow to optimize DMF fund use. We need a reform for DMF that will truly make local communities ‘atmanirbhar’ and ensure their long-term security. This will require focus on creating sustainable livelihoods and deep investments on social infrastructure, not just a focus on creating tangible assets. 

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