Utilising District Mineral Foundation funds to fight the COVID-19 crisis in India: Current and future opportunities

Brookings | Srestha Banerjee | April 6, 2020

In wake the of the growing COVID-19 crisis and the strain on healthcare resources, India’s finance minister Nirmala Sitharaman on March 26 announced that District Mineral Foundation (DMF) funds can be used by state governments to augment healthcare. This includes supplementing healthcare facilities, screening and testing requirements, and any other support that might be required.

The announcement that DMF funds will be a component of the government’s coronavirus relief package has generated a lot of discussion. In the light of this discussion, it is important to look at what the DMF funds were meant for and how they can be used effectively.

DMF was instituted exactly five years ago, in March 2015, through an amendment to India’s central mining law, the Mines and Minerals (Development and Regulation) Act (MMDR Amendment Act 2015). It has been conceptualised as a benefit-sharing mechanism with mining-affected communities, recognising them as partners in natural resource-led development. Set up as a non-profit trust in all mining districts of India, DMF comes with the precise objective to ‘work for the interest and benefit of people and areas affected by mining’, through a participatory process. It was also aligned with the important the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) scheme, that was launched in September 2015 to implement various developmental projects and welfare programmes in mining-affected areas with DMF funds.

The funds of DMF trust come through a contribution from mining companies operating in the district. Companies are required to pay 30% equivalent of the royalty amount for leases granted before 2015, and 10% for leases granted after that through auction mechanism. This must be paid for the lifetime of their operation. In just a five-year period, the cumulative accrual in DMF trusts is nearly Rs. 35,925 crores, as per available information with the Ministry of Mines. Government estimates suggest that about Rs. 6,000 crores are likely to be collected by DMFs annually. The DMF fund, therefore, is the largest non-tagged, non-plan money available for the benefit of some of India’s poorest and marginalised populations living in mining areas. The money is to be spent on improving human development indicators through investments in sectors such as healthcare, education, women and child development, improving sustainable livelihood and income opportunities in these areas and ensuring long-term security of the mining-affected communities. These have been identified as ‘high priority’ issues for DMF spending by the centre as well as state governments under the law.