Central government takes complete control of district mineral funds from states on alleged diversion of funds

The Centre has taken complete control of the district mineral foundation (DMF) funds, scuttling states’ right to sanction or approve any expenditure out of the funds accrued from mandatory contribution from mining lease holders. Since its inception in 2015-16, over Rs 49,400 crore have flown into the DMF funds.

Many states as finding this move by the centre as yet another bid by the Narendra Modi government to usurp the states’ fiscal powers and undermine their constitutionally defined role in governance. 

In a notification issued on July 12, the ministry of mines said the move was necessitated as “there are instances where a part of the funds of the DMF are being transferred to the treasury/consolidated fund of the state or state level funds (by whatever name called) or Chief Minister’s Relief Fund or other funds or schemes,” thereby “defeating the very purpose” of the creation of the DMF.

As per the MMDR (Amendment) Act, 2015, state governments must establish DMFs in all districts for the interest and benefits of the persons affected by mining-related operations; lease holders are required to contribute to these not-for-profit foundations as a defined percentage of royalty, in addition to the royalty paid to state governments.

While the sub-section 3 of Section 9(B) of the MMDR Act brought in through the 2015 amendment says, “The composition and functions of the DMF shall be such as may be prescribed by the state government”, an earlier amendment to the Act added a proviso to the sub-section that, “provided that the central government may give directions regarding composition and utilisation of fund by (the DMF)”.

However, going a step ahead, the July 12 order said, “No sanction or approval of any expenditure out of the fund of the DMF shall be done at the state level by the state government or any state level agency.” It is obvious that these directives are meant to deprive the states of discretion in the utilisation of DMF funds.

The DMF fund collections have been the highest in mineral-rich Odisha (Rs 13,336 crore), followed by Chhattisgarh (Rs 6,995 crore), Jharkhand (Rs 6,856 crore), Rajasthan (Rs 5,008 crore) and Madhya Pradesh (Rs 4,015 crore).

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