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Extractive Industries Transparency Initiative May Help Curb Illegal Mining; India Reluctant to Sign Up

  • Last week, Sashi Mukundan, India head of the oil and gas behemoth BP, which now partners Reliance Industries Limited, called for codifying of globally acceptable industry practices to sanitise production-sharing contracts between the government and oil companies. Around the same time, reports emerged about the Comptroller & Auditor General (CAG) preparing to compute losses to the exchequer due to declining gas production from RIL's KG-D6 fields, something akin to what it did to highlight the 2G scam in telecom.
  • In the same week, the Supreme Court panel examining the mining scam in Karnataka lamented the plunder of mineral resources; an earlier Lokayukta report had pegged losses to the state due to illegal iron mining at Rs 16,085 crore in a fiveyear period. The three developments are symptomatic of the deep crisis that has gripped the Indian extractive sector. Much of it stems from the opaque processes prevalent and the deep inequities they foster. Transparency in the oil, gas and mining sectors is a growing global concern, be it in resource-rich countries of Africa, Europe, the US and Australia, or in India. According to UNCTAD estimates, extractive sectors generate $3.5 trillion in annual gross revenues, or around 5% of global GDP. Leakages can be huge, proliferating corruption, serious developmental gaps and conflict.
  • A relatively recent global mechanism, the Extractive Industries Transparency Initiative (EITI), a standard for reporting and managing revenues from natural resources, is beginning to usher sanity into the sector. Although Mukundan may not have alluded to the EITI, BP is a leading supporter of this global standard. None of the Indian companies are, though EITI is beginning to make some headway. The EITI is a global, voluntary coalition of governments, companies and civil society. It requires extractive companies, including public sector undertakings, to publish what they pay governments-fees, taxes, royalty, profit shares, et al. Governments also publish what they receive in revenues from companies. An independent audit, in which civil society is a participant, examines both sets of revenue disclosures and looks for discrepancies.

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