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Chapter 7: The Mineral Trap — Mining, Money, and Power in Odisha

Here is a fact that should disturb anyone who thinks about how wealth translates into well-being: Odisha sits on approximately 28 percent of India’s iron ore reserves, 98 percent of its chromite, 51 percent of its bauxite, 24 percent of its coal, 92 percent of its nickel, and 67 percent of its manganese. By any rational calculation, this is a state that should be rich. Not rich in the abstract sense of GDP figures — rich in the way that matters: schools that work, hospitals that function, roads that connect, and lives that offer the basic dignity of economic security.

Instead, Odisha has spent most of its modern history as one of India’s poorest states. Per capita income remains below the national average. In 2025-26, it stood at Rs 1,86,761 against the national Rs 2,00,162 — and that gap, narrow as it looks in rupees, represents millions of lives lived at the margin. In the very districts where the minerals lie thickest in the ground — Keonjhar, Sundargarh, Koraput, Jajpur, Angul — poverty rates among Scheduled Tribes have historically exceeded 60 percent. In Koraput, the bauxite capital of India, rural poverty has been measured at 74.2 percent. In Keonjhar, the crown jewel of iron ore, a baseline survey found 94.1 percent of households living below the poverty line.

This is not a paradox. It is a system. And understanding how that system works — who benefits from minerals, who decides who gets to mine, what happens to the money, and why the people living above the ore remain poor — is essential to understanding Odisha’s political economy. Because minerals don’t just shape the economy here. They shape the politics. They shape who holds power, how that power is exercised, and whose interests the state serves.

The Map That Tells the Story

Start with geography, because geography is destiny in mineral-rich states.

Odisha’s mineral wealth is concentrated in a belt running through the northern and western highlands. The major deposits sit in a crescent from Mayurbhanj and Keonjhar in the north, through Sundargarh and Jharsuguda in the northwest, down through Angul in the center, and across to Koraput, Rayagada, and Kalahandi in the south. The specifics matter:

Iron Ore: Keonjhar, Sundargarh, Mayurbhanj, and Jajpur. The Barbil-Joda mining belt in Keonjhar is one of the most concentrated iron ore zones in the world. The Khandadhar Hills in Sundargarh hold vast deposits. Together, these districts produce a significant portion of India’s total iron ore output.

Chromite: Almost all of it is in two places — the Sukinda Valley in Jajpur district and the Baula-Nuasahi area in Keonjhar. The Sukinda Valley alone is one of the largest chromite deposits on the planet. Odisha contributes 98 percent of India’s chromite, and virtually all of it comes from these narrow geographic zones.

Bauxite: Koraput, Rayagada, and Kalahandi. The Panchpatmali Hills in Koraput supply NALCO’s aluminium operations. Kodingamali in Rayagada and the Niyamgiri Hills straddling Rayagada and Kalahandi are the other major deposits. These are the hills of the Eastern Ghats — and they are also the homeland of the Dongria Kondh, the Kutia Kondh, and other tribal communities.

Manganese: Sundargarh, Keonjhar, Rayagada, and Balangir. Distributed more widely than iron ore but still concentrated in the highland tribal belt.

Coal: The Talcher coalfield in Angul district holds estimated reserves of 38.65 billion tonnes — the highest in India. The Ib Valley coalfield extends through Jharsuguda and Sambalpur.

Nickel: Keonjhar and Mayurbhanj. India’s only nickel deposit being commercially explored is at Sukinda in Keonjhar.

Now overlay this mineral map with two other maps. First, the tribal map. Odisha’s 62 Scheduled Tribe communities, constituting 22.8 percent of the state’s population, are concentrated in precisely the same districts — Keonjhar, Sundargarh, Mayurbhanj, Koraput, Rayagada, Kalahandi, Malkangiri, Kandhamal. Second, the poverty map. These are the districts with the highest rates of multidimensional poverty, the lowest literacy, the worst child malnutrition, and the most fragile infrastructure.

The overlap is not coincidental. It is structural. India’s mineral wealth sits under tribal land because tribal communities historically inhabited the forested highlands that were too remote and too difficult for plains agriculture. They survived there precisely because these areas were considered marginal by the dominant economy. Then geological surveys discovered what lay beneath. And the collision between two fundamentally incompatible claims — the tribal community’s claim to habitation and livelihood, and the state’s claim to subsurface minerals — became the defining conflict of Odisha’s modern political economy.

How Mining Governance Works (and Doesn’t)

To understand why mineral wealth doesn’t automatically become public wealth, you need to understand the machinery of mining governance — who decides who gets to mine, and how money flows once mining begins.

Minerals in India are owned by the state. The Constitution places them under the Union List (for regulation of mines and mineral development) and the State List (for minor minerals). The central legislation governing mining is the Mines and Minerals (Development and Regulation) Act of 1957, commonly known as the MMDR Act, amended multiple times — most significantly in 2015 and 2025.

Until 2015, mining leases were allocated on a “first-come, first-served” basis. In practice, this meant that access to leases was determined by access to political power. If you knew the right people in the state government — specifically in the Steel and Mines Department and the Revenue Department — you could secure a mining lease. The technical requirements (environmental clearances, forest clearances, mining plans, consent to operate) were, on paper, rigorous. In practice, as the Shah Commission would later reveal in devastating detail, they were routinely bypassed, ignored, or fabricated.

The 2015 amendment to the MMDR Act replaced the first-come, first-served system with a competitive auction regime. Mining leases for specified minerals would henceforth be allocated through transparent auctions, with the highest bidder winning the right to mine. The state government would conduct the auctions, and the winning bidder would pay a premium over the statutory royalty. This was, in theory, a transformative reform — it removed the discretionary power of politicians and bureaucrats to allocate leases and replaced it with a market mechanism.

In practice, the transition was messy. In Odisha, 17 non-captive iron ore mining leases were set to expire on March 31, 2020. These leases, many of which had been held by the same companies for decades under the old nomination system, represented about 60 million tonnes of annual production out of Odisha’s total of roughly 107 million tonnes. The auction of these expired leases — concentrated in Keonjhar and Sundargarh — was one of the most consequential economic events in the state’s recent history. New players entered, old incumbents fought to retain access, and the premiums bid were substantial, reflecting both the value of the ore and the desperation to secure supply chains.

The Money Trail: Royalties, Premiums, and Revenue

When a mine operates legally, money flows to the state through multiple channels:

Royalty: A percentage of the value of the mineral extracted, set by the central government. For iron ore, this is currently 15 percent of the sale price. For coal, it varies. Royalties are the largest single revenue stream from mining.

Auction premium: The additional amount bid by the successful bidder in the auction process, expressed as a percentage of the royalty. In some Odisha auctions, premiums exceeded 100 percent of the royalty — meaning the state received more than double the statutory royalty from auction winners.

Dead rent: A minimum annual payment by the leaseholder, regardless of production.

Cess and taxes: Various state-level levies on mineral production and transport.

The aggregate numbers are significant. Mining contributes approximately 7.3 percent of Odisha’s real GSDP. The value of minerals produced in the state reached Rs 87,086 crore in 2021-22. Non-tax revenue from the mining sector was estimated at 84 percent of Odisha’s total non-tax revenue in 2024-25. This is a state whose fiscal architecture is deeply dependent on what comes out of the ground.

And yet. The very districts that produce this revenue are the ones with the worst development indicators. The money flows upward — into the state treasury in Bhubaneswar, into corporate balance sheets in Mumbai and Delhi, into the accounts of contractors and intermediaries along the supply chain. What flows back down is a fraction, filtered through government schemes whose implementation is uneven, and through the District Mineral Foundation, whose story we will come to.

The Shah Commission: Anatomy of a Scam

In November 2010, the central government constituted a Commission of Inquiry headed by Justice M.B. Shah, a retired Supreme Court judge, to investigate illegal mining of iron ore and manganese across India. What the Commission found in Odisha was staggering — not because illegal mining was a surprise to anyone who had been paying attention, but because the scale, the brazenness, and the complicity of every layer of governance were documented with a precision that left no room for plausible deniability.

The Numbers

The Commission’s report on Odisha, submitted in 2013, found that approximately 22.80 crore tonnes of iron ore and manganese had been extracted illegally over nearly a decade. The financial value of the scam in just two districts — Keonjhar and Sundargarh — exceeded Rs 59,000 crore.

To put that in context: Rs 59,000 crore was larger than Odisha’s entire annual state budget at the time. It was money that should have flowed into the state treasury as royalty, that should have funded schools and hospitals and roads in the very districts being mined. Instead, it was extracted, transported, sold, and the proceeds distributed among a network of mining companies, transporters, politicians, and complicit officials.

The Violations

Of 192 mining leases examined in Keonjhar and Sundargarh, 176 were located within dense forests. This meant that mining was occurring in areas where the Forest Conservation Act required specific clearances that, in many cases, had never been obtained. Ninety-four of these leases were operating without environmental clearance from the Ministry of Environment and Forests. A total of 146 cases of excess mining — extraction beyond the approved mining plan — were registered by Odisha’s own mining department for violation of environmental clearance, mining plans, and consent to operate norms.

The Commission documented how mining companies routinely mined beyond their lease boundaries, extracted more ore than their mining plans permitted, declared high-grade ore as low-grade to reduce royalty payments, and transported ore without proper documentation. The infrastructure of evasion was industrial in scale — not a few rogue operators but a systematic pattern involving the majority of active leaseholders.

The Companies

The Commission named at least 70 companies. The list read like a who’s who of Indian industry: the Steel Authority of India Limited (SAIL), a public sector company; Tata Steel, one of India’s most respected private firms; the Odisha Mining Corporation (OMC), the state’s own mining company; Essel Mining and Industries, part of the Aditya Birla Group; Serajuddin and Company; Ram Bahadur Thakur Limited; Sarada Mines; Mideast Integrated Steels. These were not fly-by-night operations. These were established companies with legal departments and compliance officers and corporate governance frameworks, and they had been mining illegally for years.

The involvement of OMC — the state government’s own mining corporation — was particularly damning. The entity that was supposed to mine on behalf of the people of Odisha was itself complicit in the illegal extraction of the people’s minerals.

The Complicity

The Shah Commission held both the central government and the Odisha state government responsible. It documented how state and central government officers had allowed illegal mining to continue for years in violation of multiple laws. The mining department, the forest department, the pollution control board, the revenue department — all had the authority and the obligation to prevent illegal mining. All had failed, and the Commission’s language left little doubt that the failure was not incompetence but connivance.

Railway officials were named for facilitating the transport of illegally mined ore. Trucks carrying undocumented ore moved freely on highways that were, in theory, monitored by transport authorities. The entire chain — from the pit face to the port or steel plant — was lubricated by corruption at every checkpoint.

The Aftermath

Here is where the story takes the turn that explains why institutional trust is so fragile in Odisha. The Shah Commission report was submitted to the central government in October 2013. The government sat on it for six months before making it public. When it was finally released, the response was not a wave of prosecutions and accountability. It was a slow bureaucratic grind.

In 2017, the Supreme Court, responding to a petition by the NGO Common Cause, imposed a 100 percent penalty on companies found guilty of illegal mining in Odisha — meaning they were required to pay compensation equal to the full market value of the ore illegally extracted, calculated from 2000-01 onwards. The court directed the money to be deposited by December 31, 2017, and ordered it to be used for tribal welfare in the affected mining districts.

The total demand was approximately Rs 19,174 crore from 131 leaseholders. As of late 2025, significant amounts remain unrecovered. Reports suggest between Rs 2,700 crore and Rs 3,966 crore (including interest) are still pending. The state government under both BJD and BJP has not demonstrated the urgency one might expect in recovering money that was effectively stolen from the public treasury.

No one went to jail. Let that sit. Twenty-two crore tonnes of illegally mined ore. Rs 59,000 crore in just two districts. Named companies, named officers, documented violations. And the consequence was a financial penalty that has been only partially recovered, over nearly a decade. The message this sends to mining interests — that illegal mining is, at worst, a cost of doing business — is not lost on anyone.

POSCO: The $12 Billion Ghost

If the Shah Commission revealed how mining actually operates when no one is watching, the POSCO story revealed something equally important: how the promise of mining-linked industrialization operates in the political imagination — and how far that imagination is from reality.

The Promise

In June 2005, POSCO India — a subsidiary of the South Korean steel giant Pohang Steel Company, one of the largest steelmakers in the world — signed a Memorandum of Understanding with the Government of Odisha to build a 12 million tonnes per annum integrated steel plant with a captive port. The projected investment was $12 billion, making it the largest foreign direct investment proposal in Indian history at the time.

The project was to be located near Paradip in Jagatsinghpur district, requiring more than 4,000 acres of land encompassing the gram panchayats of Dhinkia, Nuagaon, and Gadakujanga. The steel plant would be fed by captive iron ore mines in Keonjhar district, and the finished steel would be exported through a dedicated port.

For the state government, this was the transformative project — the one that would vault Odisha from a raw material exporter into a value-added industrial economy. For POSCO, Odisha’s cheap iron ore and coastal access offered a competitive advantage over rival steel producers. For the central government, the project was proof that India could attract mega-FDI in manufacturing.

The Reality on the Ground

The 4,000 acres were not empty land awaiting development. They were home to approximately 20,000 people whose livelihoods depended on one of the most productive betel vine (paan) economies in India. About 3,000 of the 4,004 acres required were forestland, dotted with approximately 5,000 betel vine plantations that gave farmers an assured average income of at least Rs 20,000 per month — a substantial income by rural Odisha standards. The coastal ecology also supported fishing communities and cashew cultivation.

The environmental impact assessment, as later analyses would show, failed to account for these complex livelihood systems. The betel vine economy was not visible in the standard economic surveys that inform project planning because it was informal, unregistered, and embedded in a local ecological knowledge system that outsiders didn’t understand. What the project planners saw as “forest land” and “government land” was, in lived reality, a functioning economic ecosystem.

The Resistance

The POSCO Pratirodh Sangram Samiti (PPSS) — the Anti-POSCO People’s Movement — was formed in August 2005, barely two months after the MoU was signed. What followed was one of the most sustained land-rights movements in modern Indian history.

The resistance was led substantially by women. Hundreds of women and children blocked entry points to the villages, squatting on sand in scorching summer heat to prevent survey teams and district officials from entering. The movement faced police action, arrests, and what human rights organizations documented as systematic intimidation. The American Bar Association would later publish a report documenting the persecution of human rights defenders in Dhinkia.

The district administration carried out land acquisition in two phases — 2011 and 2013. In 2011, the state government was forced to scale down the project from 12 MTPA to 8 MTPA and reduce the land requirement to 2,700 acres, excluding Dhinkia from the affected area. But fierce resistance in other villages forced the administration to suspend land acquisition for the next two years.

The legal battles were equally protracted. The project required forest clearance, environmental clearance, and land acquisition approval — each contested at multiple levels. The Meena Gupta Committee, appointed by the Ministry of Environment, found violations in the environmental clearance process. The National Green Tribunal heard challenges. State and national courts processed petition after petition.

The Exit

After twelve years of protests, legal battles, and mounting costs, POSCO formally withdrew from the project in March 2017. The company cited commercial reasons — changes in global steel markets, the 2015 amendments to the MMDR Act (which complicated captive mining arrangements), and the failure to acquire all required land. But the fundamental reason was simpler: the project had become politically and operationally unviable because the people who lived on the land refused to leave.

What happened next is equally telling. In June 2017, the Odisha government transferred the land to JSW Utkal Steel Limited for yet another integrated steel plant. The same land. The same villages. A different company. The cycle of announcement, resistance, and uncertain outcome began again. Dhinkia’s people, who had spent a decade fighting POSCO, found themselves fighting JSW. As one villager told a journalist: “The company name changes. The fight doesn’t.”

What POSCO Reveals

The POSCO case is not just a story about one failed project. It reveals the structural gap between what political economists call the “announcement economy” and actual development. Odisha’s political economy has been built, in part, on the promise of mega-projects — the MoU-signing ceremonies, the investment summit declarations, the crore-denominated headlines. Make in Odisha 2018 generated Rs 4.19 lakh crore in “investment intentions.” The actual investment commitment was Rs 15,917 crore. Utkarsh Odisha 2025 announced Rs 16.73 lakh crore in investment intentions. Whether the conversion rate will be better this time remains to be seen.

POSCO spent twelve years in Odisha and produced exactly zero tonnes of steel. What it did produce was displacement, ecological damage (thousands of trees felled, betel vines destroyed, mangroves cleared), police action against civilians, and a deep erosion of trust between local communities and the state government. The $12 billion that was supposed to transform Odisha’s economy was a ghost that haunted the coast for a decade and then vanished.

Vedanta vs. Niyamgiri: When the Mountain Voted

If POSCO was about coastal land and betel vines, the Niyamgiri case was about something more primal — a mountain that is a god.

The Setup

The Niyamgiri Hills, straddling Rayagada and Kalahandi districts, rise to about 1,500 metres in the Eastern Ghats. They are the homeland of approximately 10,000 Dongria Kondh, a tribal community whose entire civilization — agriculture, worship, governance, identity — is organized around the mountain and its deity, Niyam Raja. Beneath the summit plateau lies an estimated 73 million tonnes of bauxite, worth billions of dollars.

In 2003, Vedanta Alumina, a subsidiary of the London-listed mining giant Vedanta Resources controlled by billionaire Anil Agarwal, applied for environmental clearance to mine this bauxite. The ore would feed Vedanta’s alumina refinery at Lanjigarh, at the foot of the Niyamgiri Hills. The refinery was already under construction before the mining lease was secured — a sequence that tells you something about the confidence with which corporate capital assumed government approval.

The Odisha Mining Corporation (OMC) was the nominal mining leaseholder, with Vedanta as the buyer. This arrangement — a state entity holding the lease while a private company benefits — was a common structure for sidestepping restrictions on private mining.

The case moved through multiple layers of government and judiciary. The Ministry of Environment and Forests initially granted stage-I forest clearance in 2008, but this was challenged by environmentalists and tribal rights activists. The matter reached the Supreme Court, which in April 2013 delivered what would become one of the most consequential judgments in Indian environmental and tribal rights jurisprudence.

The Court ruled that the gram sabhas — village assemblies — of the affected Dongria Kondh and Kutia Kondh communities must be consulted before any mining could proceed. This was not a suggestion or a procedural formality. The Court specifically directed that the gram sabha proceedings must take place “independently and completely uninfluenced, either by the project proponents or the state or central governments.”

The legal reasoning was groundbreaking. The Court invoked the Forest Rights Act of 2006, which recognizes the rights of forest-dwelling tribal communities over their traditional habitats. It applied the principle of “public trust doctrine” — that the state holds natural resources as a trustee for the people, not as an owner free to dispose of them at will. And it recognized that a tribal community’s religious and cultural relationship with a landscape constitutes a legal right that industrial interest cannot override.

The Vote

Between July and August 2013, twelve gram sabhas were convened across the Niyamgiri area. Each voted unanimously against mining. The Dongria Kondh — a community of 10,000 people, largely illiterate by formal metrics, with no lawyers, no lobbyists, no corporate communications department — had defeated a multinational corporation valued at billions of dollars through the most democratic mechanism available: a direct, participatory vote.

In January 2014, the Ministry of Environment, Forest and Climate Change — the same ministry that had earlier facilitated Vedanta’s clearance process — rejected the project entirely, based on the gram sabha outcomes.

In 2016, OMC attempted to challenge the gram sabha resolutions in the Supreme Court, alleging technical errors. The Court rejected the petition, upholding its earlier judgment.

The Victory and Its Limits

The Niyamgiri case became an international symbol of indigenous resistance. Prafulla Samantara, the veteran activist who led the legal campaign against Vedanta’s mining project for over a decade, won the Goldman Environmental Prize in 2017 — the world’s most prestigious award for grassroots environmental activism.

But the victory was specific, not systemic. The bauxite remains in the mountain. Vedanta’s refinery at Lanjigarh still operates, importing bauxite from elsewhere. The policy frameworks that enabled the threat — the MMDR Act, the discretionary clearance processes, the structure of mining governance — remain largely intact. The precedent that gram sabhas can block mining has been cited in subsequent cases, but it has not become an automatic or reliable shield. Each case must be fought individually, and tribal communities rarely have the organizational capacity, legal support, or media attention that the Dongria Kondh received.

And the Dongria Kondh themselves? A Wire investigation ten years after the Supreme Court judgment found that they still lack basic government facilities — schools, health centers, roads. They won the right to keep their mountain, but the state that lost in court has not rewarded them with development. Whether this is bureaucratic indifference or quiet punishment is a question worth asking.

The Mining Mafia: How Illegal Mining Actually Works

The Shah Commission documented illegal mining at scale. But the Commission’s findings were about large companies and registered leases. Below that layer — and intertwined with it — operates what Odisha’s political vocabulary calls the “mining mafia.” Understanding how this works requires understanding the entire supply chain from pit face to port.

The Nexus

Illegal mining in Odisha operates through a politician-contractor-bureaucrat nexus that is neither secret nor particularly subtle. A local political figure — an MLA, a block-level leader, sometimes a panchayat functionary — provides political protection. A contractor operates the mine, either on unregistered land or by extracting beyond the approved limits of a registered lease. A bureaucrat in the mining department, the forest department, or the transport authority provides the necessary paper cover — either by not inspecting, by inspecting and not reporting, or by providing fraudulent documentation.

The specifics in Keonjhar are illustrative. Reports document how “non-Odia mining mafia” — a loaded phrase that carries both legitimate concern about external exploitation and potentially nativist sentiment — operate mines through local intermediaries. Ore is declared as lower grade than it actually is, reducing the royalty payable. Trucks are systematically overloaded — a practice that reduces transport costs per tonne but destroys roads that the state then must repair with public funds. Iron ore lumps are transported with permits issued for iron ore fines, which carry a lower royalty rate.

The Transport Chain

The mining corridor roads in Keonjhar and Sundargarh are a world unto themselves. Trucks — many overloaded far beyond legal limits — move ore from mines to railway sidings or directly to industrial consumers. The checkpoints along these routes are supposed to verify documentation, check weights, and ensure compliance with transport regulations. In practice, they function as toll booths for the informal economy. A fixed payment per truck to the checkpoint operator ensures passage regardless of documentation irregularities.

Mining officers who attempt to enforce regulations have faced physical violence. OdishaTV reported attacks on mining officers by the sand mafia in Keonjhar — a phenomenon that tells you everything about the power dynamics on the ground. When a government official risks assault for doing their job, the system has inverted: the illegal operators are more powerful, locally, than the state apparatus.

In 2024, after Chief Minister Mohan Majhi’s first visit to Keonjhar — his home district — he announced a crackdown on mineral smuggling and action against non-Odia miners for illegalities. Three months later, reports indicated that little had changed. Police seized trucks carrying undocumented iron ore and manganese. Crackdowns on illegal sand mining produced headline-worthy raids — 56 trucks seized in one operation. But the structural incentives that make illegal mining profitable — the vast gap between the cost of a bribe and the value of the ore, the weakness of enforcement institutions, the political protection that keeps the system running — remained intact.

Sand Mining

While iron ore and manganese dominate the headlines, sand mining is the more pervasive form of illegal mineral extraction. Sand from river beds — the Baitarani, the Brahmani, the Koel — is essential for construction, and demand has surged with Odisha’s building boom. Sand mining is technically regulated under minor mineral rules, but enforcement is minimal. In Keonjhar, villagers have taken to guarding the Baitarani riverbank through the night to prevent illegal sand extraction — an extraordinary act of community self-defense that speaks to both the seriousness of the problem and the absence of effective state intervention.

The District Mineral Foundation: Promise and Capture

The District Mineral Foundation was created by the 2015 MMDR Amendment Act as an attempt to address the most glaring injustice of India’s mining economy: that the communities living on top of the minerals bear the environmental and social costs of extraction while receiving almost none of the financial benefits. The idea was elegant: mining leaseholders would pay a contribution to the DMF — up to one-third of the royalty for leases granted before 2015, and 10 percent for leases granted through the new auction process — and this money would be spent on the welfare of mining-affected communities.

The Money

Odisha has been the single largest beneficiary of the DMF system. By June 2023, cumulative DMF collection in the state had reached Rs 23,120 crore. By October 2025, the figure had risen to approximately Rs 34,052 crore. To put this in perspective, this is an enormous sum — more than many state-level welfare schemes receive in a decade.

The district-level breakdown reveals the concentration. Keonjhar, the state’s most mineral-rich district, has received the highest DMF allocation of any district in India — Rs 8,840 crore as of 2025. Sundargarh, Jajpur, Angul, Jharsuguda, Koraput, and Rayagada account for 90 percent of the state’s DMF revenue. These are the districts where mining happens, and therefore the districts whose communities are supposed to benefit.

The Spending Problem

Here is where the promise meets reality. Odisha has consistently spent only about 50 to 55 percent of its DMF funds. The highest DMF collection in the country, and roughly half of it sits unspent. Even Keonjhar, with its Rs 8,840 crore collection, has spent only about Rs 3,000 crore over seven years.

The rules require that at least 60 percent of DMF funds be spent on “high priority areas” — drinking water, health care, education, environment, and welfare of women and children — and up to 40 percent on “other priority areas.” But investigative reports suggest that the reality is more complicated. OdishaTV reported allegations that huge amounts of DMF funds had been “siphoned off” in Keonjhar and Sundargarh. Chief Minister Majhi directed officers to expedite DMF spending and ordered audits and annual report submissions — an acknowledgment that the system was not functioning as intended.

The structural problem is one of governance. DMF funds are managed at the district level, typically under the Collector’s supervision, with decisions made by a governing council. But the mining-affected communities — mostly tribal, mostly poor, mostly lacking political voice — are rarely the ones making spending decisions. The funds tend to flow toward infrastructure projects (roads, buildings, water supply systems) that benefit broader populations rather than the specific communities displaced or affected by mining. This is not necessarily corrupt — roads and water systems are genuine needs — but it means the DMF’s promise of targeted benefit to mining-affected people is diluted.

There is also the problem of absorption capacity. Many mining-affected areas lack the institutional infrastructure to design, implement, and monitor large-scale development projects. Block-level officials are stretched thin. Gram panchayats lack technical capacity. The result is either unspent funds (because projects aren’t planned or executed) or poorly executed projects (because implementation capacity is weak). The money exists. The machinery to convert it into human welfare does not reliably exist.

The Resource Curse as Political Phenomenon

Economists have a term for what Odisha experiences: the “resource curse” — the counterintuitive finding that countries and regions rich in natural resources often perform worse on development indicators than resource-poor ones. The academic literature on this is extensive, and the mechanisms are well-documented. But in Odisha, the resource curse isn’t just an economic phenomenon. It’s a political one.

Rent-Seeking Over Production

When enormous wealth can be extracted from the ground with relatively little labor, the economic incentive shifts from productive activity to rent-seeking — capturing a share of the extraction revenue rather than building enterprises that create value through work. In Odisha’s mining districts, political careers are built not on providing governance but on facilitating or controlling access to mining leases, transport permits, and regulatory approvals. An MLA from a mining constituency doesn’t need to build a great school system to win re-election. They need to be seen as someone who can get things done in the mining ecosystem — smoothing approvals, resolving disputes between operators, ensuring that jobs in the mines go to the right communities.

This creates a particular kind of politics — transactional, patronage-based, organized around the distribution of mining-related benefits rather than the provision of public goods. It is not that politicians in mining areas are more corrupt than politicians elsewhere. It is that the structure of the mining economy creates incentives for a specific kind of political behavior, and that behavior does not naturally lead to broad-based development.

The Displacement Machine

Mining requires land. In Odisha, that land is overwhelmingly tribal land. Between 1951 and 1995, an estimated 2,155,317 tribal people were displaced by development projects in the state — a figure that includes dams and industrial plants as well as mines. The Kalinganagar firing of January 2, 2006 — in which 14 tribals were killed by police during protests against the construction of a boundary wall for a Tata Steel plant in Jajpur — remains seared into the political memory of tribal Odisha.

Each displacement creates a population of dispossessed people who lose not just land but entire livelihood systems — forests, fisheries, agricultural plots, communal grazing grounds. Rehabilitation and resettlement, where it happens at all, typically provides cash compensation and small plots, neither of which replaces the complex, multi-layered economy that the displaced community has lost. The result is a growing population of “development refugees” — people whose poverty is directly caused by the development that was supposed to eliminate poverty.

Resistance as Counter-Politics

The flip side of displacement is resistance. Odisha has produced some of India’s most significant resource-related social movements — the anti-POSCO movement, the Niyamgiri struggle, the Kalinganagar resistance, the ongoing contestation around mining expansion in Keonjhar and Sundargarh. These movements are not anti-development in any simple sense. They are assertions that development cannot mean the destruction of the communities it is supposed to serve.

The Maoist insurgency in southwestern Odisha — which peaked in the 2000s and 2010s and has now been reduced to an estimated 13 active cadres as of early 2026 — was rooted, in part, in the same dynamics. Malkangiri, Koraput, Rayagada, and Kalahandi were the heartland of Maoist activity precisely because they were the heartland of tribal dispossession. When the state fails to protect its most vulnerable citizens and instead facilitates their displacement for the benefit of external capital, the space for armed insurgency opens. The near-elimination of the Maoist movement through Operation Kagar and related security operations is a policing achievement. Whether the underlying grievances have been addressed is a different question.

Current Mining Policy Under BJP

The change of government in 2024 brought a new approach to mining policy in Odisha — though “new” requires qualification. The BJP government under Chief Minister Majhi has aligned state mining policy more closely with the central government’s direction, which emphasizes liberalization, auction-based allocation, downstream value addition, and the strategic importance of critical minerals.

Auction Acceleration

The state has continued the auction process initiated under the MMDR Act amendments. As of 2025, Odisha had auctioned over 30 mineral blocks, including critical mineral blocks containing lithium, rare earth elements, graphite, and vanadium. The 2025 amendment to the MMDR Act further streamlined the auction process, allowed leaseholders to add critical and strategic minerals to existing leases, and expanded the scope of exploration licensing. For Odisha, which contains deposits of several critical minerals that are central to India’s electric vehicle and defense industry ambitions, this represents a significant opportunity.

Downstream Value Addition

The push to move Odisha from raw material export to downstream processing has been a stated goal for decades. Under the BJP, it has gained additional momentum through alignment with the central government’s industrial corridor plans. The Odisha Economic Corridor — with nodes at Gopalpur-Bhubaneswar-Kalinganagar and Paradip-Kendrapada-Dhamra-Subarnarekha — is designed to connect mineral extraction zones with processing and port facilities. Two aluminium parks specializing in aerospace, EV, and defense-grade alloys are planned. A petrochemical hub at Paradip, anchored by IOCL’s dual-feed naphtha cracker project worth Rs 61,077 crore, aims to create downstream chemical industries.

What’s Changing

The policy direction is clear: more mining, faster auctions, more processing, tighter integration with national industrial strategy. The Odisha Mineral Rules 2025 introduce AI-driven monitoring systems to detect illegal mining and grade misreporting — a technological response to the problems the Shah Commission identified.

What’s Not Changing

The fundamental tension remains. More mining means more displacement, more environmental stress on already degraded landscapes, and more pressure on tribal communities who have nowhere else to go. The DMF mechanism exists to compensate affected communities, but as we’ve seen, it is only partially effective. The auction system is more transparent than the old nomination system, but transparency in lease allocation doesn’t automatically translate into accountability in operations. The new government has promised crackdowns on illegal mining, but the structural incentives that drive illegality — the enormous gap between the value of ore and the cost of corruption — remain.

The deeper question is whether Odisha’s minerals can be governed in a way that genuinely benefits the people who live above them. Not just through royalties flowing to the state treasury, not just through DMF funds partly spent on district infrastructure, but through a model of development that treats tribal communities as stakeholders with rights rather than obstacles to be managed or compensated. The Niyamgiri precedent suggests what such a model might look like. The gap between that precedent and the prevailing practice suggests how far there is to go.

The Budget Stabilisation Fund: A Fiscal Innovation

One aspect of Odisha’s mineral governance deserves mention not for its failures but for its sophistication. Recognizing that mineral revenues are inherently volatile — dependent on global commodity prices, production levels, and policy changes — Odisha created a Budget Stabilisation Fund administered by the Reserve Bank of India. The corpus, built from surplus revenue, exceeded Rs 13,000 crore as of March 2023. The fund serves as a buffer against revenue shocks, ensuring that a collapse in iron ore prices or a disruption in coal production doesn’t immediately translate into a fiscal crisis.

This is genuinely good governance. NITI Aayog ranked Odisha first among all states in its Fiscal Health Index 2025, with a score of 67.8. The state’s debt-to-GSDP ratio is among the three lowest in India, alongside Gujarat and Maharashtra. These fiscal metrics are the product of disciplined management — and they are funded substantially by minerals.

The irony is precise: Odisha’s fiscal health is excellent because it has efficiently managed the revenue from minerals. The well-being of the communities from whose land those minerals are extracted is not excellent. The state’s treasury is stable. The people’s lives are not. This is the mineral trap in its purest form — a system that works beautifully for the institution while failing the human beings the institution is supposed to serve.

Conclusion: The Churning Underground

Odisha’s mineral story is not a simple tale of corruption and exploitation, though it contains plenty of both. It is a story about how a particular kind of natural wealth creates a particular kind of political economy — one organized around extraction rather than production, around rent-seeking rather than value creation, around the management of conflict rather than the pursuit of shared prosperity.

The minerals are not going anywhere. Global demand for steel, aluminium, chromium, and critical minerals will intensify as the world industrializes and electrifies. Odisha’s strategic importance to India’s industrial economy will only grow. The question is not whether the minerals will be mined but on whose terms, for whose benefit, and at what cost.

The Shah Commission showed what happens when accountability fails. POSCO showed what happens when communities are treated as inputs rather than stakeholders. Niyamgiri showed what’s possible when indigenous rights are taken seriously. The DMF shows both the potential and the limitations of trying to buy consent for extraction. The resource curse literature shows that none of this is inevitable — that mineral wealth can be governed well, but only through institutions that are accountable, transparent, and genuinely oriented toward the public good.

Odisha has all the pieces. The minerals. The fiscal discipline. The legal precedents. The social movements that keep power in check. The question that defines the next generation of Odisha’s political economy is whether these pieces can be assembled into something that works — not just for the state treasury, not just for the mining companies, not just for the politicians who broker access, but for the tribal family in Keonjhar whose home sits above a billion dollars of iron ore and whose children still walk miles to a school that may or may not have a teacher.

That is the mineral trap. It is not that the wealth is invisible. It is that the system is designed to move it away from the people who need it most.

Source Research

The raw research that informs this series.