MAC: Mines and Communities

Mine closure (Part One) - the Indian case

Published by MAC on 2018-10-29
Source: EPW India

Closing mines and rehabiliating them is one of the most important challenges facing governments and companies across the world - encompassing not only historically-impacted states such as Australia, Canada and the USA, but also vast acreage in India and Africa, not to mention across the Chinese land mass,

In the following article, a social sciences' researcher presents findings relating to a lead-zinc operation in  Orissa (Odisha), along with his analysis of how closure has failed to work in India as a (w)hole.

This mine was run by the government-owned company, Hindustan Zinc, but majority sold to Vedanta/Sterlite in 2000 - much to the ire of many people, not least its earlier workforce.

Mine Closures and the Issue of Livelihood

Sujit Kumar Mishra

Economic and Political Weekly

20 October 2018 (updated 22 October 2018)

Mining communities are the worst affected by mine closures since they derive their livelihood directly or indirectly from the industry. In order to analyse the shift in the livelihoods of people during and after mining operations, different stakeholders of Hindustan Zinc Limited in Sargipali, Odisha across 24 mining villages were interviewed, and additional evidence was taken from documents and reports. A grim picture emerges, owing to the lack of a sustainable mine closure plan or transparency between the planners and the villagers.Mine closure in India—and its impact on the livelihood of the concerned communities—is one of the several important mining issues that have not been properly addressed over a period of time.

Mine closure occurs as a result of the total extraction of the mineral reserves within the physical limits of a deposit or un-workability of the deposit due to technical or economic reasons. (Tripathy 2004: 345)

There are two types of mine closures: sudden and gradual. Sudden mine closure refers to an instantaneous decision to shut down a mine, barely giving any prior indication to the affected mining communities. On the other hand, gradual closure refers to a process in which affected communities have sufficient time to cope with their losses as well as find suitable sustenance, minimising impact to the maximum extent possible without compromising on any decision taken on account of closure. Gradual closure allows those who stand to lose their livelihood a window to find alternate means of sustenance even in difficult situations. While decision-making in sudden closure aims at addressing survival in the immediate present, gradual closure focuses on minimising loss from a long-term perspective. Gradual closure, a preventive measure, is more preferable and allows for minimisation of loss to a larger extent. Dowd (2005) compares both the methods by quantifying them and concludes that the costs associated with gradual closure can be one-fifth the costs associated with sudden closure, making the former the more financially feasible option.

Mine closure has been a challenging issue both in developed and developing countries. To ameliorate its effects, we need to have proper design, supervision, and effective implementation, especially of financial obligations. This article attempts to critically analyse the shift in the livelihood pattern of mineworkers from the mining period to the post-closure period.

What Is a Mining Community?

“A mining community is one where the population is significantly affected by a nearby mining operation” (Veiga et al 2001: 190–92). The community and mining framework is built on the logic of mutual dependence. For example, the number of communities directly dependent upon mining in Canada is 128, whereas many more indirectly derive their livelihood from mining (Veiga et al 2001). Oskarsson (2011) observes a strengthened local economy by development in terms of mining in the Singareni Colleries of Telangana. In this context, the various derived livelihood options available for the people are in the milk trade, tailoring, carpentry, vegetable vending, grocery vending, petty business, and the running of small hotels and salons. These are some common characteristics shared by mining communities around the world. While there exist such positive impacts of mining activities in the concerned areas, the negative impacts are huge; both of these are borne by the mining communities. These communities face a number of problems such as ill health (Mishra 2010; Mishra 2015); reduction in agricultural production (Mishra and Pujari 2008); impact to livelihood (Mishra 2009); displacement (Kannabiran and Mishra 2016); accidents (Mishra and Mishra 2014); and damage to their houses (Mishra 2016). Figure 1 (p 27) explains the different issues that mining communities experience.

The concepts of “equity” and “principle of intergenerational equity” have to be taken into account in order to turn a mining community into a sustainable mining community. The former is always at the receiving end in terms of negative externalities of mining whereas the latter integrates the concepts of equity over generation. (Equity can be defined as equality in terms of quality of life and standard of living.) On the other hand, intergenerational equity is something that sustains equality in the future in a changed environment so that no one will have to suffer on account of the change (Beder 2000).

Davidson (1998), Kahn et al (2001), and Veiga et al (2001) provide a brief description of the features of successful and sustainable mining communities. After a close review of the related literature, we zeroed in on three types of indicators that determine the sustainability of a mining community: (i) external factors (policy environment); (ii) equity (sociocultural aspects, caste heterogeneity, poverty level, and past experience); and (iii) endogenous institutional mechanisms (quality of leadership, process of decision-making, and benefit sharing). All of these, put together, provide the “incentive structure” for a mining community to become a sustainable mining community. In other words, a sustainable mining community is one that should be Pareto-optimal (Mornati 2013). They should not be sufferers at the cost of any change in the mining activities (closure in the present case).

Regulatory Framework

The development and growth of the Indian economy is enmeshed largely with the activities of its mineral sector. The best example is Sundargarh district (a mineral-rich district in Odisha), which contributed the maximum share of gross district domestic product to the gross state domestic product (8.54%) during financial year 2010–11 because of its rich mineral resources (Government of Odisha 2014). In order to profit from mineral extraction, the Government of India (GoI) has put in place a large number of institutional instruments; for example, the Mines and Minerals (Regulation and Development) Act, 1948 (GoI 1957); the Mineral Concession Rules, 1960 (GoI 2012); the Mineral Conservation and Development Rules, 1988 (GoI 2011); the National Mineral Policy (NMP), 1993 (Ministry of Mines 1993) and 2008 (Ministry of Mines 2008); and so on. A closer observation of these instruments finds them contributing to a state-centric model of development, of which maximisation of large revenue by the state in a sustainable way appears to be the main objective. This particular approach largely ignores the cost component of the growth model in India. Those most affected by this cost component of so-called development are the mining communities, who are always at the receiving end of the side effects of the process.

The first NMP of the GoI, in 1993, stressed on the issues of rehabilitation and mine closure:

Mineral deposits being exhaustible, once the process of economical extraction of a mine is complete, there is need for its closure. Especially where the mining activities have been spread over a few decades, mining communities get established and closure of the mine means not only loss of jobs but also disruption of community life. Whenever mine closure becomes necessary, it should be orderly and systematic and so planned as to help the workers and the dependent community rehabilitate themselves without undue hardship. (Ministry of Mines 1993)

The GoI announced a new policy in March 2008 in order to replace the 1993 one. In the new NMP, there is also a paragraph mentioning mine closure:

Once the process of economical extraction of a mine is complete, there is need for scientific mine closure which will not only restore ecology and regenerate biomass but also take into account the socio economic aspects of such closure. Where mining activities have been spread over a few decades, mining communities get established and closure of the mine means not only loss of job but also disruption of community life. Whenever mine closure becomes necessary, it should be orderly and systematic and so planned as to help the workers and the dependent community rehabilitate themselves without undue hardship. (Ministry of Mines 2008)

Neither version is silent about the mining communities (though they talk very little about them). The central government vide Notification Nos GSR 329(E) and GSR 330(E) (both dated 10 April 2003) amended the Mineral Concession Rules, 1960 and Mineral Conservation and Development Rules, 1988, respectively. According to these amendments, all existing mining lessees are required to submit a Final Mine Closure Plan one year before the actual closure. Moreover, it was also mentioned in these notifications that the Progressive Closure Plan and Final Closure Plan should be done in compliance with the guidelines issued by the Indian Bureau of Mines (nd). The section “Economic Repercussions of Closure of Mine and Manpower Retrenchments” in the guidelines, which deals with personpower retrenchment, compensation to be given, socio-economic repercussions, and remedial measures consequent to closure of mines, lists the following repercussions:

(i) Number of local residents employed in the mine, status of the continuation of family occupation and scope of joining the occupation back;

(ii) Compensation given or to be given to the employees connecting with their and their family members’ sustenance;

(iii) Satellite occupations connected to the mining industry, number of persons engaged therein, continuance of such business after mine closes;

(iv) Continued engagements of employees in the rehabilitated status of mining lease area and any other remnant activities; and

(v) Envisaged repercussions on the expectation of the society around due to closure of mine (Indian Bureau of Mines, nd).

The guidelines for mine closures are silent on “dependent communities” or “mining communities.” On the whole, it can be suggested that the mining communities be given ample room by the institutional frameworks as these communities normally suffer in two different stages: in the first stage, when the land is acquired for the setting up of the project, and the second stage, when the project is closed down (field observation).

Data and Methodology

This study has been conducted in the closed lead mines owned by Hindustan Zinc Limited (HZL) in Sargipali, Odisha. HZL took possession of 500 hectares of land in April 1974 and started excavation. Officially, production in Sargipali is supposed to have started in 1980, though it was actually started in 1978. After the mine was closed in 2000, its offices in the areawere also shut down. Now, only broken house structures exist. In order to retrieve this information, the researcher carried out informal interviews in the study area. First, efforts were made with the people from the villages near HZL Sargipali. Later, the information was cross-verified with former HZL officials.

This study adopted a purposive sampling method to establish the sample villages and respondents. A list of direct employees of the mine and their present addresses was obtained. In addition to this, a second list of temporary mine employees was obtained. Lastly, a third list was obtained, detailing a third category: people who derived their livelihood by depending upon the first two categories of people. All these three categories of stakeholders are scattered across 24 villages at differing distances from the mine.

Extensive field surveys, in depth interviews, and interactions with the sample constituted the core of the study methodology. The study involved a three-pronged approach to collection of information: (i) conducting a field survey; (ii) collection of data from secondary sources such as demographic data in census reports, mine-related newspaper clippings from archival sources, and various investigative reports; and (iii) interviews with stakeholders such as local vegetable vendors, barbers, temple priests, kirana1 shop owners, hotel owners, cycle repair shops, and so on. Apart from this, focus group discussions were also conducted amongst different categories of people. Two phases were planned mainly for this study. Discussions with the state, district, and local experts were conducted in the first phase. In the second phase, stakeholders were divided into two categories: (i) “impacted groups” or the mining communities (basically those who stood to lose their livelihood), and permanent and temporary employees of the mine; (ii) “response groups” of people such as local entrepreneurs.

Results and Discussion

An attempt is made in this section to assess the impact of mining closures and the issue of livelihood on the mining employees as well as on the mining communities, with specific reference to HZL Sargipali in Odisha. It is divided into two parts: (i) a socio-economic survey of the sample households; and (ii) an impact assessment. The first part analyses the profiles of the 422 respondents surveyed and the importance of mining operations in those villages in terms of livelihood. The second part, on the basis of data collected from the sample villages, discusses the impact of closure on the employees as well as on the dependent communities.

Distribution of Households by Social Group and Age: The total number of households surveyed in the present study was 422, out of which 197 were those of mining employees (both permanent and temporary) and the remaining 225 were from dependent communities.

This section has categorised the total sample on the basis of their social group: Scheduled Castes (SCs), Scheduled Tribes (STs), Other Backward Classes (OBCs), and Others. Out of the total households, 58 households from the Other category (13.7%), 132 OBC households (31.3%), 63 SC households (14.9%), and 169 ST households (40.0%) are covered in the study. An analysis has been conducted regarding the age of the employees (out of a total of 197 mining workers, both temporary and permanent) during closure (Table 1). For better understanding, the mining workers are classified into three broad categories based on their age: high (>50 years), middle (40–49 years), and low (up to 40 years) age groups.

Among all the workers, around 40% are skilled labours and fall into the high-age category. A low-age workforce is more mobile and generally more adaptable for retraining into other industries. Generally, a non-mining employer will not prefer to recruit a miner older than 50 who is considered an unskilled worker. The scenario is similar for skilled workers of the same age bracket as well. Sometimes they accept a distress wage that is much lower than the actual wage rate, for the want of options.

Livelihood and the Local Economy

“Local economy” refers to the economy of a particular area that provides an array of livelihood options to the local community. The higher the resourcefulness of the local economy, the more varied the livelihood options; for example, the local economy of the study area (Sundargarh district) is heavily dependent on agriculture. However, apart from agriculture, there were plenty of derived livelihood options provided by the local economy during the mining period (Table 2, p 29).

The closing down of mining activities at HZL Sargipali influenced the local economy adversely. Locals had taken loans under the Integrated Rural Development Programme (IRDP) scheme and produced milk to earn their livelihood. However, the sudden closure made them vulnerable as their customers left the place, leaving them out of business and unable to repay their loans. Due to lack of proper care, their cattle began to succumb, and they thus entered into an interlocked credit market. The purchasing power of the people decreased because of the closure of mining activities. Many migrated to Goa to engage in fishing, while others migrated to Gujarat to work in the textile industry and remained there for six to seven months.

In order to rehabilitate the employees, vocational training programmes (designed after identifying people’s needs) should have been conducted for them before initiating closure. Instead, there was a time lag of three years between closure and a training programme conducted in 2004 by Kalinga Institute of Industrial Technology (KIIT), Bhubaneswar. However, the training programme (on agriculture) was unsuitable as it was not chosen based on the needs of the retired employees of the mine, but rather on the expertise available in KIIT. For example, a retired fitter was given training on agriculture.

Local spending by mine workers: Apart from the above discussion, estimations of the local economic impact were calculated based on the average net salary data provided by the mine workers (both permanent and temporary) and estimated the local spending habit of the mining workers. Local spending figures were obtained via field work. The important items under local spending included in this study are vegetables from the local market, kirana shop purchases, pressing of clothes, repairs (cycle and motor vehicle), children’s tuition (private), paan shop spending, and other consumables such as liquor, social dining, and so on (Table 3).

In the primary survey, the respondents reported spending an average of 42.5% of their earnings on the local economy in that particular area and within the surrounding areas, which indicated a direct income for actors in the local economy. A significant impact was thus realised on actors in the local economy: murmura sellers, labour affiliated with contractors, vegetable vendors, and those running ration shops, clothing shops, and so on. Some closed their kirana shops as well. There was great impact on the temporary construction workers (coolies2 and mistrys).

Migration and/or commuting: Theoretically, the wage rate in a labour market is determined by the demand for and supply of labour. However, any deviation in the labour demand and supply disturbs the normal wage rate. After the closure of HZL Sargipali, a large number of direct and indirect employees joined the labour market. As a result, the supply of labour increased tremendously, crossing the labour absorption capacity of the local economy and drastically lowering the normal wage rate. The excess supply of labour persisted for a long period of time. Thus, the reduced wage rate became a distress wage rate. Whatever amount was offered by the actors on the demand side had to be accepted by the labour (supply side). The labour force was not at all a part of the determination of wage rate mechanisms in the local labour market. Frustrated by the distress wage rate, many people started withdrawing themselves from the overpopulated local labour market. For this, they adopted two strategies: (i) migration for a period of six to nine months outside Odisha, and (ii) commuting to nearby towns (within a range of 22 to 45 kilometres) for work. Table 4 shows that only 6.1% people migrated on a permanent basis. About 23.3% migrated to Goa to engage in fishing and to Gujarat to work in textile industries and remained there for six to nine months.

Migration is largely seen among the lower age groups. They do not have as much domestic responsibility as compared with the other two categories of people (that is, middle- and high-age groups). It is generally these latter ones who commute from their homes to nearby towns for their livelihood. The kind of migration depends upon a person’s capacity to migrate. Those in the middle- and high-age groups have very limited choices as they have to think about the education and marriage of their children. They also have to take care of their dependent parents in their old age (Table 5). This is seen from the huge expenditure on education and health.

As can be deduced from Table 5, the commuting labour force is generally more vulnerable. Their earnings completely depend upon the availability of work. They go into towns with the hope of getting work on a daily basis. Sometimes, they come back without any income. The basic difference between migration and commuting in the present context is the assuredness of income. While those who have undertaken temporary migration have assured income, those commuting do not (Box 1).

The Political Economy of Closure

VRS—the starting point: When HZL Sargipali was started, it was not a profit-oriented project. According to the employees, the reason behind the opening of the mine was to provide job opportunities to the local people. The mine had approximately 600 employees, apart from some contract labourers. HZL Sargipali was situated in an isolated area, and commuting and communication were difficult. Moreover, most of the unit heads in the mine were from Rajasthan, and given the disadvantages of the location, had a callous and negative attitude towards the mine and were against its continuance. The mine was operational for some time, but, when the government changed, its privatisation was proposed. The Sterilite Company was finalised on as the private entity to take over, but the company imposed the condition that all mines incurring loss should be discontinued; this included not only HZL Sargipali but also mines from Tundu and Agni Kundla. HZL Sargipali was the first mine proposed for closure. HZL started planning to close the mine, though technical persons indicated that it still possessed mineral deposits. Those who could have resisted the planned closure and helped the employees (the labour union, in this case) made a dealwith the project authorities (as per the affected people during the field survey) behind the scenes and betrayed the employees.

The policy followed by HZL Sargipali was purely a project-specific mechanism called the Special Voluntary Retirement Scheme-II (earlier followed by Zinc–Lead Smelter, Visakhapatnam, a subsidiary of HZL, for compensation). The basis on which the valuation of compensation was done was demonstrably arbitrary and skewed in nature. Around 84.3% of the employees were not aware about the procedure for valuation of compensation. The local union of the employees was affiliated to the federation (all trade unions of the different HZL mines were federated with a coordination committee, which shared similar objectives, and the federation was affiliated to the Indian National Trade Union Congress). HZL had connived with the local union and came up with a voluntary retirement scheme (VRS); the leaders of the union started urging the employees to opt for the VRS. According to the scheme, an employee would receive money in two components: (i) their provident fund, and (ii) a redundancy amount.

The union enticed the employees with promises of a handsome amount by way of redundancy compensation. The trick they played with the employees was to total both components—provident fund and redundancy amount—and reflect it as one. Of course, the first component was simply an accumulation of deposits made by individual employees and not money offered by HZL. At that time, bank interests were very high for recurring deposits. The union convinced the employees that if they deposited the VRS compensation amount in the bank, they would earn interest equivalent to their monthly salary, and that too without doing any work. There was no consensual discussion with the employees prior to closure, a factor that undoubtedly contributed to the poor overall outcome.

This is an example of the failure of the classic “Bargaining Theories” propounded by Arthur Cecil Pigou, which talks about the bargaining procedure of two parties or agents. As per this approach, the authorities should have committed to not carrying out the solution unless a mutually agreeable rehabilitation plan had been devised. However, in this case, the role of one agent (mine employees) was not considered, whereas the other agent (the project authority) used its discretionary power, despite the former’s consistent effort to engage in the process. The crucial point here was the lack of proper dissemination of information.

Misinformation and subterfuge: The labour union as well as the federation tried their level best to induce employees to agree to the VRS proposal and accept the compensation. They instigated the employees by putting it about that the underground environment was not safe, that the pillars inside the mine had become weak and could collapse at any time, causing risk to life. They indicated that it would be wise for the employees to take the redundancy amount, keep it in the bank, and save their lives. They further insisted that, if not availed of before withdrawal, the compensation offered via VRS would be lost, that natural closure would follow and employees would not even get the redundancy amount. Further, they argued that the employees had already worked in hazardous and unhygienic conditions, that their health would sooner or later deteriorate, and that the VRS was, therefore, a golden opportunity for them to retire early while still healthy and receive a significant compensation that could earn them a passive income by way of bank interest.

The number of underground workers was more than the number of workers on the surface. A few of the union members worked underground and had the opportunity of making acquaintance with other workers underground. They used this opportunity to influence the other workers to opt for VRS. The union had created a divide between the underground and surface workers, and succeeded in their scheme. Apart from this, the local labour union used caste as a weapon to motivate the people to accept VRS. A large section of the workers belonged to the Gond tribe, which has ST status. The local labour union instigated them by pointing out that it was only the tribal workers who were doing hard labour, and in hazardous conditions, while the non-tribal people working on the surface were deriving the benefits. The union convinced them that the non-tribal surface workers were opposing closure in order to benefit in the long run from the labour of the tribal workers.

As the underground workers became convinced by the union, the surface workers started feeling nervous. They went to different influential politicians, who showed only superficial interest in the matter. These employees then met the director general of mines safety (DGMS). The DGMS expressed surprise over the matter and revealed that he had received no communication from the mine requesting permission for closure within a month; he informed the workers that even if permission to close the mine was sought, it would take three years to grant. However, since he was a government servant, he was unable to express his opinion about VRS.

The employees returned to HZL Sargipali and tried to convince the underground workers that if they did not opt for the VRS they would get benefits, but the underground workers were reluctant. They argued about why they should expose themselves to hazards when they could accrue interest at par with their salary without doing any work. In the meantime, the union intervened and said that if they did not opt for VRS now, they could not do anything later on. The mining authorities began circulating a VRS notice with a cut-off date for opting in, beyond which, it stated, nothing could be done. The authorities would not reveal the exact date of closure. They further intimidated the employees by claiming that the mine was in the process of privatisation and that once a private owner bought the mine, they would throw out the employees. This created panic among the surface workers and they too were tilted in favour of VRS due to a sense of insecurity.

Sudden entry into a monetary economy: Since this was their first exposure to such a large sum of money, most of the workers were confused. Their sudden exposure to an economy where the entire medium of exchange was in terms of money was the cause of their misery.3 Furthermore, their lack of experience in financial matters made them vulnerable. Some of them were duped by private banks, which promised higher rates of interest but eventually decamped with the deposits, leaving them penniless and forcing them into daily wage labour. This study tried to enquire into whether there was any financial planning workshop organised to help the workers use their compensation correctly. However, 91% of the households interviewed denied there was any such facility provided. This study also tried to track the fraud cases from the total cases and found 17 cases of fraud from the study villages. Out of the total fraud cases documented, more than 80% of the cases involved ST workers.

The study team met a few of them. At first they were afraid to open up and engage in conversation because of the sense of insecurity they developed during the closure period. They had lost faith in people in general and officials in particular. Due to the fraud they had been subjected to, many of them were robbed of their hard-earned money and were struggling to make ends meet. One of the woman respondents, whose husband used to earn `16,000 as salary while working in the mine (apart from the free medical facilities provided), expressed her inability to even purchase medicine for her ailing family members.


The closure process of HZL Sargipali was very sudden. Workers were unprepared to take proper decisions about their livelihood, and whatever steps they took were not planned. As a result, those who started businesses incurred huge losses due to lack of prior experience. The institutional mechanism in terms of policy was purely project-specific in nature. It emerged from the field survey that the VRS they opted for under pressure from the labour union was perceived by a majority of the employees as an unfair deal. However, most of them accepted it from fear of getting absolutely nothing if they resisted.

This study has presented the arbitrariness in the planning of the mine closure process at HZL Sargipali. It has been clearly brought out that in order to ensure sustainable livelihoods even after closure, effective planning with regard to mining closure activity is required. Alternate channels of employment should be arranged for at the time of closure. As highlighted earlier, institutional mechanisms such as socioeconomic impact assessment, proper dissemination of information, and effective consultation should be developed and implemented at the government and community levels to ameliorate the impact of mine closures on the community.



1 A shop selling daily needs and provisions.

2 A general labourer.

3 Earlier transactions were based on mutual trust and exchange. Despite low levels of income, workers were able to survive. However, exposure to large sums of money in the form of provident fund and the redundancy amount was new to them and they were unable to handle it properly, leaving them more vulnerable.


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( )teaches at the Council for Social Development, Hyderabad.

The author is thankful to the Indian Council of Social Science Research, New Delhi for financial support. Thanks are also due to D Narasimha Reddy, Kalpana Kannabiran, D P Tripathy, P Oskarsson, Prajna Paramita Mishra, and Harish Chandra Mishra for their valuable feedback and suggestions at different stages, and Nata Kishor Mishra, Samima Begum, and Sachin Biswakarma for fieldwork coordination. An earlier version of this article has been presented at the International Conference on Promoting Socio-Economic Equity in South Asia: Challenges and Prospects, held on 15–16 July 2015 in Colombo, Sri Lanka.



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