Council: The National Council (NC) has recommended the government to urgently table the Mines and Minerals Management Act 1995 (Amendment Bill) to enhance transparency, curb corruption, and prevent tax evasion and other business malpractices in the mining sector.
The house also recommended to include in the amended Bill and the Mineral Development Policy (MDP) provisions to grant a special role for the State Mining Corporation (SMC) in the mining sector including exclusive rights over primary mining activities, exploration and extraction of strategic minerals in the country.
The house proposed the private sector be encouraged to invest only in areas that provide opportunities for value addition.
The final recommendation was to uphold the existing Terms of Reference (ToR), the finance ministry issued on December 20, 2014 for the SMC. The recommendation is also in particular to observe Section 6 of the ToR, which states: “The State Mining Corporation shall be the designated body to develop strategic minerals as defined by the MoEA.” Following the question hour session on June 8, the interpellator, eminent member Dasho Tashi Wangyal sought and received the permission of the NC Chairperson for a debate on the issue in accordance with Chapter 8, Section 137 of the NC Act.
The re-deliberation was also called on as the majority of members of the house were not satisfied with economic affairs minister, Lekey Dorji’s responses on mines and minerals being centralised and a few people reaping the benefits of the sector.
Highlighting the answers presented by Lyonpo Lekey Dorji during the question hour, Dasho Tashi Wangyal in response to the issue of granting exclusive rights over strategic minerals to SMC, said that there was a need for more substantive reasons apart from the minister stating that there could be problems and difficulties in the future if SMC were given exclusivity over the strategic minerals.
Dasho Tashi Wangyal said that the minister had said the main reason that the present government does not believe in granting exclusive rights over strategic minerals to SMC is due to the failure of state owned mines in China. The minister had stated that China has over 100,000 mines and about two thirds of them were not doing well. He had also said that the private companies are more efficient compared to state owned enterprises.
“The National Council would like to highlight that the failure of state owned mines in China should not be the determining factor for denying granting special status for the SMC in Bhutan,” said Dasho Tashi Wangyal. “The two countries cannot be compared in terms of scale and social and political context.”
However, Lyonpo Lekey Dorji said that he mentioned the Chinese incident just as an example and that it was not the basis for the government’s disapproval to grant SMC with special status over strategic minerals.
The minister clarified that he did not mention anything about the government not providing SMC with strategic minerals. “When SMC was formed, it was mainly to develop the strategic minerals in the country and particularly phyllite,” Lyonpo said.
“Nevertheless, in a study conducted by the SMC themselves, it was found that although the phyllite reserve in the country was abundant, due to the poor quality of the mineral, it was not commercially viable,” he added.
Lyonpo said that providing exclusive rights to SMC over strategic minerals might not be in line with democratic governance. “If everything is given to government, democracy fails and this could lead to major problems in the future,” he said.
The minster during the earlier question hour session had said that strategic minerals are the prerogative of the government according to the draft Mineral Development Policy and will be kept as it is. The minister had also highlighted the importance of privatisation of the sector to reap the maximum benefit.
“The government could consider granting SMC exclusivity for those strategic minerals that are precious and rare such as gold, silver, copper, tungsten and graphite among others, or those with security implications like uranium and plutonium,” the minister had said on June 8.
Minerals such as gypsum, coal and dolomite must be left for the private sector, the minister said.
Dasho Tashi Wangyal added that only in economic textbooks, the private sector is projected as efficient. Efficiency, he said, can exist only if there is competition and level playing field for all competitors.
“There are limits to efficiency gains from competition in the mining sector due to high entry barriers resulting from huge investments,” he said.
The gains from private sector efficiency are offset by losses due to corruption said Dasho Tashi Wangyal. He pointed out that the Royal Audit Authority’s (RAA) report in 2014 estimates that between 2008 and 2012, the annual loss due to corruption in the mining sector is estimated to be Nu 134 million (M). On the other hand, he said that the National Revenue report shows that on an average royalty from mines during this period was only Nu 119M per annum.
Further, Dasho Tashi Wangyal said that the RAA report shows that the country’s current policies governing the mining sector have not necessarily benefitted the private sector. “It seems to have led to the development of not the private sector, but of a few private individuals.”
Lyonpo Lekey Dorji said that concentration of wealth from minerals in the hands of a few people is not true. “Personally, I feel this statement is wrong. Minerals have benefited the public as a whole,” he said. The minster said that according to the RAA, the government received 51 percent of the total earning from dolomite mining in the country between 2008 and 2012.
Similarly, from gypsum mining the government received 53.31 percent of the total earnings and 58 percent from coal mining. “Therefore, at least 50 percent of the total earnings from large mining companies is given to the government,” said the minster. “The mining operators also pay royalty and other taxes for the minerals in the country which also goes to the government. The dolomite mining has paid a total of Nu 920M as taxes between 2008 and 2012. Similarly Nu 545M and Nu 383.42M were paid by gypsum and coal miners respectively.”