A revenue-sharing model for sustainable land use

India supports 16 per cent of the world’s population on 2.4 per cent of the world’s land. India’s land and natural resources are under tremendous pressure due to overpopulation as the limited resource is required for food (agriculture), habitat (urban and rural) and economic infrastructure (industry, offices, mining, and transportation).

In a developing economy, as the requirement of land increases, the use of land changes, transitioning from forest land to agriculture and industrial usage. This shift is further underscored by changes in human habitation, which changes from rural to urban agglomerations.

Every change in use of land is associated with economic, environmental and social impacts, which may be positive (land price appreciation, livelihood generation, etc) as well as negative (displacement of human settlements, loss of biodiversity and forest cover, etc). The change in use of land itself accounts for more than 8 per cent of carbon emissions worldwide (2012).

The 12th Plan sets a target to reach a Gross Domestic Product (GDP) growth rate of 8.2 per cent in the next five years. This is in order to significantly increase the quality of life, reducing poverty and fostering environmentally sustainable development.

The share of the manufacturing industry in GDP product is expected to increase during the next 10 years to 25 per cent from the current 16 per cent.

Manufacturing industry and mining, directly or indirectly, are the major drivers for land use changes which include human settlements and amenities therewith.

It is associated with potential risks to the environment, including reduction in biodiversity and forest cover, toxic effluents, pollutants and hazardous waste. The social risks of local displacement and underpayment for land too are abundant in India.

The need for a sustainable land management system is therefore imminent. Sustainable Land Management (SLM) is defined by the World Bank as — a knowledge-based procedure that helps integrate land, water, biodiversity, and environmental management (including input and output externalities) to meet rising food and fiber demands, while sustaining ecosystem services and livelihoods.

SLM is necessary to meet the requirements of a growing population. The system focuses on mitigating any potential conflicts of different land usage like industry, mining, urban development, and agriculture as well as with local stakeholders like the community and the environment.

A case in point is the Indian mining industry which is plagued with the classic ‘Dutch Disease’. Mining is a key factor in India’s economic growth and is probably one of the largest land use diverter after agriculture. It poses extensive issues, specially related to its unsustainable land use diversions.

Mines in India are often located in forest lands inhabited by indigenous tribal population. These areas typically depict a resource curse wherein the mineral resource-rich areas are home to extremely impoverished people.

Sustainable mining will therefore require an exhaustive multi-disciplinary and multi-stakeholder approach with a focus on surrounding ecosystem and social ‘resilience’ that can be aligned to the prevalent financial architecture.

The Centre has already come up with draft sustainable development framework for mining which is modelled on SDF by International Council of Mining and Metals (ICMM). What is more important here though, is to go beyond legislations towards creating innovative financial models for sharing economic benefits from mining among industry, government, local community and the environment. The Gujarat government presents a compelling example where the royalty-sharing model provides 90 per cent of the mining royalties to the same district’s development and 20 per cent to the specific taluk/block where mining is taking place.

Some international best practices also include allocation of a definite percentage of all profits in the local area’s development through social and environment initiatives.

Land is the most important factor for environment resilience and the survival of the local community.

Any land diversion should be dealt with utmost care and be accompanied with innovative financial models that provide long-term economic security to local communities as well as safeguard the environment through revenue sharing mechanisms among different stakeholders.

The writer is the Senior President and Country Head, Responsible Banking, and Chief Sustainability Officer of YES Bank