Reposted from Dawn.com Herald Beta | February 18, 2012 | Link to full story

By Maqbool Ahmed

Minerals in Balochistan

It's official: nearly 80 per cent of all minerals produced in Pakistan come from Balochistan, according to the latest data compiled by the Geological Survey of Pakistan. What is less known is that the province's mineral potential is much bigger than the current production statistics suggest. While this gap between the potential and actual production is generally blamed on the absence of security, insiders say successive governments have done nothing to build the technical capacity of the mining sector and political meddling has checked the development of mining as a possible engine of growth for the provincial economy.

Only 22 people, out of Balochistan Mines and Mineral Development Department's total strength of 560, work with its directorate general for mines and minerals "” the section that deals with the technical aspects of exploration and licensing. Requesting not to be named, a former director general of the department revealed that such capacity deficiency coupled with political interference is the most important factor in the minimal development of the mineral sector in the province. The myopic provincial political leaders see the sector merely as an avenue for employing their favourites and issuing mining leases to relatives and cronies, he alleges. The other short-sighted provincial policy is to keep mining royalties to the minimum, which is to the disadvantage of the provincial exchequer, he explains. "The department [which should have ensured] mining's growth is [indeed] severely hampered by such political interference," he says.

The former official's disclosures cannot be dismissed as the raving and ranting of a possibly disgruntled retired bureaucrat. A review of the National Mineral Policy 2002, jointly done by the World Bank and the federal Ministry of Petroleum and Natural Resources, confirms what he says. The review report discovered that the development of Pakistan's mineral resources in 2003 was limited to quarries (open pits), producing only precious stones, limestone, rock salt gypsum and modest amount of coal, mostly from Balochistan. Since then, there has been hardly any change. For instance, the report pointed out thatPakistanexported gems worth 2.2 million US dollars in 2001; this registered a meagre increase of 1.4 US million dollars to reach 3.63 million US dollars in 2010. During the same period,India's gem export earnings shot up from 4.9 billion US dollars in 2001 to a whopping 33.5 billion US dollars in 2010.

In what can be seen as evidences of inefficient work culture and overweening political interference, the workers of the Balochistan Mines and Mineral Development Department were waging daily protests in the second week of the last month against the appointment of a pharmacist and a primary teacher on technical posts that they were not qualified for. An inside source tells the Herald that political interference has crippled the department's working. To quote an example of such interference, he alleges that successive ministers for mines and minerals have been interfering in the issuing of licences for prospecting, exploration and mining even when they do not have the authority to do so. The ministers do this, the source says, by blocking elevation of eligible senior officers as members of the department's mines committee which, under the rules, is the sole authority to grant or refuse licences and leases.

v One of these officers, Dr Saeed Baloch, has been eligible for promotion for the last six years to the post of the department's director general, a position that will automatically make him the head of the mines committee. The other officer is Zarbat Khan who could have become a director of the department two years ago, and thereby a member of the committee, but has not. Taking advantage of the undefined rules to govern the working of the department, the ministers appoint their favourites but theoretically ineligible and junior officers to these posts and thereby influence the process of issuing licences and leases, the source adds.

Siddiq Raisani, the owner of several mining companies, goes a step further in blaming the politicians. It is not just the minister for mines and minerals who is involved in subverting the rules for issuing licences, he alleges, and adds that half of Balochistan's cabinet is doing the same thing because many provincial ministers either have shares in mining companies or own them fully.

In Balochistan's provincial capital Quetta, stories about ministers and senior government officials owning mining companies through their frontmen are rife even when it is almost impossible to find the paper trail linking a particular minister or official to a particular company. As of now, nearly 400 individuals and companies hold prospecting licenses for 32 minerals in the province and cabinet ministers and government functionaries have stakes in many of these companies through proxies, says the government source.

The provincial government officials that were willing to speak on the matter say there is no way to stop people from forming and running mining companies on the allegation that they enjoy political backing. The law does not bar even ministers and serving government officials from owning mining companies, they add.

v But the Herald's source in the mining department claims that the politically connected companies always get a better deal. "The ministers not only manage to get new prospecting licences and fresh mining leases for thousands of acres of lands [for the companies they support and sponsor], they also have their men sitting in the mines committee who transfer existing leases, without informing the original lease holders, to the [ministers' favoured firms]," he says.

A December 2010 ruling of the Balochistan High Court verifies this. In 2007, Pakistan Petroleum Limited (PPL) received a prospecting licence for iron ore for 2,006.12 acres of land in Pachin Koh, in Chagai district's Nokundi area. Subsequently, the mines committee issued a mining lease to PPL that came into effect from January 2007 and was valid for the next 20 years. OnJune 7, 2010, the mines committee issued a show-cause notice to PPL, telling it that its lease area could be reduced because it had kept the site underutilised for a long time. Though the committee gave the PPL 30 days to file a reply, it allotted 929.75 acres of the land under the company's lease to another firm, M/s Shahnawaz Pumice, before the expiry of that period. The PPL lodged an appeal against this before the secretary of the Mines and Minerals Development Department. When he did not take any decision, PPL filed a petition at the Balochistan High Court which set aside the orders of the mines committee and observed: "It was expected that [the secretary], with whom the petitioner (PPL) had filed the appeal along with a stay application, would have acted in this case of blatant violation of the rules "¦ but instead [the secretary] virtually sat on the appeal."

A source claims that it is only on paper that M/s Shahnawaz Pumice is owned by one Shahnawaz, a poor man from Chagai. He was made the owner of the company because the Balochistan Mineral Rules 2002 require that a company applying for and getting a prospecting licence in a district must have a local person as a shareholder. The firm is actually formed and run by one Shabbir Mengal who is publicly known in Quetta as a frontman for several ministers of the Balochistan cabinet, the source says.

In a clear acknowledgement of unwarranted interference in mining affairs, the World Bank review report recommended eliminating discretionary ministerial and official powers from the process of granting or refusing mining licences and leases. Instead, those powers appear to have become even stronger.

Another major consequence of the provincial ministers' blatant involvement in mineral affairs is that Balochistan has registered hardly any increase in its royalty receipts from minerals over the last many years. Since most current cabinet members have also been a part of the provincial cabinets in successive previous governments, they are reported to have ensured that royalties remain low. For instance, in 2010, the provincial mines and mineral department suggested imposing a royalty of 170 rupees on every tonne of coal mined in the province but the provincial cabinet approved only 70 rupees a tonne as royalty, officials reveal.

Balochistan Chief Secretary Ahmed Bukhsh Lehri, however, denies that this is an issue. He says that until recently the provincial government was actually spending from its own kitty to encourage coal mining in Balochistan. "The coal miners were receiving subsidy rather than paying any royalty," he explains. So, any money coming in as royalty, no matter how small, is an improvement.