February 20, 2020
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The Great Diamond Rush

As diamond cartels De Beers and Australia's CRA set eyes on mining in India, Digvijay's detractors cry foul

The Great Diamond Rush

DIAMONDS and politics make strange bedfellows. But not in Madhya Pradesh where they threaten to bring down a government as charges of corruption and a sell-out of national honour are being bandied about.

With the discovery of the most valuable stone on earth in Raipur, one of the poorest districts in the state, you have a curious cocktail of Chief Minister Digvijay Singh, intra-Congress dogfights, a muted state BJP and two gigantic international diamond cartels, De Beers from South Africa and CRA from Australia—all bickering over how the diamond source ought to be excavated.

This diamond rush had its beginning in March 1986 when an impoverished tribal chanced upon a shining object in his backyard in Raipur's Payalikhand village. According to locals, a couple from the same village discovered another stone about the same time. On confirmation by the local goldsmith that the stone was indeed a diamond, they fled to neighbouring Kalaha-ndi district in Orissa, never to come back.

But the ball was set rolling although initially the search was restricted to diamond-struck villagers. It was not long before that the local mafia turned their attention to Raipur. Then, the state administration moved in and the conclusions from the first studies were impressive. Of a handful of diamond sightings the world over, Raipur was regarded as one of the potential hotspolts. Subsequent surveys by the Geological Survey of India (GSI) confirmed vast deposits of diamond and alexandrite in the region. The chance discovery snowballed into a full-fledged political controversy between Digvijay and his government on one side and the Opposition, including Digvijay's own partyman S.C. Shukla, on the other.

While Digvijay said that inviting foreign companies was the best option, other leaders claimed state-run organisations could handle the task equally well. Battlelines were drawn on swadeshi-videshi lines.

According to state officials, between 1988 and 1993 there had been unprecedented illegal attempts to dig out diamonds, most of it fruitless as it depended on chance rather than technology. In 1994, the state government invited tenders from companies; in the first phase for prospecting the area and second phase for mining and marketing the product.

The last date given was March 31, 1994. The state government sho-rtlisted five companies, but after negotiations ANOOP KAMATH decided on De Beers at first slot followed by two Australian companies, CRA and Ashton, for the next two places. Under Digvijay's orders, an MOU was ordered to be signed with De Beers.

And herein lies the twist. Says BJP MLA Brijmohan Agrawal from Raipur: "It is designed to help foreign companies only. Companies like De Beers put in their applications only after March 31, 1994. On technical reasons alone it needs to be knocked out." He has other objections as well. According to him, public sector companies which are equally qualified were left out deliberately. "The Mineral and Metal Trading Corporation (MMTC) is the largest trader as far as gems and jewellery are concerned. Then, the National Mineral Development Corporation (NMDC), which is under the Central Steel and Mines Ministry and the Mining Corporation of Madhya Pradesh, specialises in mining," adds Agrawal.

In a petition filed before the Madhya Pradesh High Court at Jabalpur, Agrawal has listed several points on which foreign participation cannot be allowed:

  •   According to Mineral Concession rules, if prospecting operations are carried out by the GSI, the state government cannot give mining rights to any outside party.

  • Under the Forest (Conservation) Act, 1980, no mining lease rights can be given in any forest or a reserved area. The allotted area in this case—3,500 sq kms—comprises largely of forest land.

  • No permission has been obtained from the Central government. The state government should have approached the Centre.

  •   After the tender, the MMTC and NMDC applied as a consortium. They should have been considered as one unit and not separately. The MMTC claim was rejected on the ground that it did not conduct mining operations. The government stand on the consortium: since NMDC had been shortlist-ed, there was no need to shortlist MMTC.

  • None of the foreign companies is keen to mine for alexandrites because it is not as profitable as the kimberlite variety.

But the state government has also built up a case for De Beers. Says Minister of Mines and Housing Satnarain Sharma: "It is a question of superior technology. In 1994-95, the only diamond mines in India at Panna produced 24,800 carats. Compared to this, in 1995 alone, the Kimberley mines in South Africa produced 21 lakh carats of diamond and the Argyle mines in Australia mined 399 lakh carats." Agrees Director of Mines and Geology, Dev Raj Virdi, whose laboratory in Raipur has 18 boxes of kimberlite dug out from the Deobhog mines: "We have only the basic technology. We require foreign technology for better output." Principal Secretary, Mining, S. Lakshmi-narayan says if foreign firms are disallowed on political grounds alone, then it would be an opportunity missed. "Would you believe it that after 30 years of mining, the total amount of royalty from diamonds has now reached only Rs 2.05 crore which is less than 0.5 per cent of the state's total mining revenue? Even Botswana earns over $2 billion from royalties alone," he points out.

Some heat seems to have been generated by the terms offered by the foreign companies. Though the contract's arrangements are unclear, one source says that foreign companies are opposing royalties of 20 per cent (of the value of the diamond) and ar e instead demanding that it be scaled down to 10 per cent or 11 per cent. As opposed to this, the offer made by the MMTC-NMDC consortium includes the 20 per cent royalty to be paid to the state government. In addition, the public sector combine also offered 12 per cent of its profits to the state government for 'infrastructural' development of the area and its populace. "But royalty," points out Lakshminarayan, "is fixed by the Centre and is currently based at 20 per cent of the value. The question of lowering the royalty does not arise."

 Some grist to the mill was added with the  tie-up of De Beers and Reliance Industries. According to rules, foreign investors are expected to tie up with an Indian company. Australia's CRA will be represented here by the Tata's cement company, ACC. In an interview, Digvijay ruled out any controversy over Reliance's role. "De Beers and Reliance have formed a company. They have got the clearance of the Foreign Investment Promotion Board. I see no controversy in this." Digvijay's detractors allege that the chief minister had favoured Reliance Industries. To support their contention, they say that a top Reliance manager was taken on the State Planning Board by Digvijay.

What has added to the chief minister's problems are attacks from his partymen—including three-time chief minister Shukla. "No one will be allowed in Raipur," he asserted. A De Beers team, which landed at Raipur on December 6, was not allowed to proceed beyond the airport lounge.

Digvijay plays down Shukla's charges. "I respect Shyama Charanji. But the question of a sell-out does not arise because no mining rights have been given to De Beers to date. On the other hand, my government has given mining rights in diamond and gold to the Madhya Pradesh Mining Corporation, a state government undertaking." With the state government all set to float fresh global tenders; with foreign firms, including De Beers, prepared to respond again to the tender bid—and Digvijay's detractors willing to fight to keep out foreign players—it will be a long time before the swadeshi-videshi divide is settled.

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