Costing Goa’s mineral resource curse
In late August we had a discussion to talk about the ways in which the ‘suppressed entitlement’ of Goa’s population, in relation to mining profits, could be freed. This would have the effect of galvanising a sense of right and ownership using the admittedly troublesome monetary incentive route (we will find a way to deal with this).
The concentration of wealth is astonishing, even in a region that is part of a country whose state Gini coefficients for income are well over 0.45 (over 0.30 is considered to be potentially socially destabilising). Goa’s top six iron ore mining families together with India’s largest private sector iron ore exporter have amassed immense wealth. Based on the derived industry profit for 2009-10, the share per resident family is Rs 3.19 lakh (not including profits from illegal ore sale, not subtracting for the ‘producer’s share of risk and managerial input’).
Based on time-series profits for the years 2000-01 to 2009-10 and average per ton prices we can ‘entitle’ the 360,000 resident families to their ‘withheld shares’ as follows: Rs 2.80 lakh in 2008-09, and working backwards Rs 2.50 lakh, Rs 2.15 lakh, Rs 1.80 lakh, Rs 1.45 lakh, Rs 1.10 lakh, Rs 76,000, Rs 40,000 and Rs 28,000. This totals close to Rs 16.5 lakh due per family for a decade of mineral exploitation. That’s one aspect, to place in perspective the stratospheric super-profits of the main mining families (companies). The other is to work towards a ‘true cost’ accounting of the extraction.
The startling per family ‘entitlement’ also raises the question of how they have been used by the state of Goa. The indications from the contribution of mining and quarrying (the basic accounting head) in the Goa state accounts is that this has contributed between 6% and 4% of state domestic product. We may raise this contribution by 2% to include mineral extraction activities not covered directly by this head. Even so, where is the gross capital formation rate at the state level to show how this wealth has been used? Where is the rise in the net savings rate to show how this wealth has been retained? These are serious questions for the state government to answer.
A ‘true cost’ accounting of the extraction will help us achieve two things:
1. It will help fix the liability of the state administration towards the costs of ecosystem loss and degradation caused by mineral extraction.
2. It will similarly ‘spread the liability’ on a per family basis so that an economic disincentive is created at the household level for such an activity (mining) if households shared both profit and liability.
How are the populations of the 11 talukas (populations in the note below) to benefit from their share of ‘entitlements’ and ‘liabilities’ of the export profits and environmental burden of iron ore mining? To what extent must the state administration bear the liability and underwrite the costs of mitigation for all of Goa’s affected (directly and indirectly) families? How can participatory shares and fund instruments be created that embody these concepts, who will regulate them, how will they be counter-guaranteed? These are the community economics questions that will face us when we make such calculations.