Nainital, Dehradun and New Delhi: Can governments outsource state functions of policing, tax collections and environmental protection to private companies? And claim they are doing so to prevent disasters?

The BJP government of Uttarakhand has done so, an investigation by The Reporters’ Collective shows. 

The Uttarakhand state government has handed over its powers to collect royalty and other taxes from riverbed miners and police illegal-mining to private players. 

The state has gone a step further, establishing by regulation, what many experts believe is a classic case of conflict of interest. Any private company that wins the rights to collect taxes from riverbed mining will also be given priority over others to mine the rivers. In other words, a mining company could now be collecting taxes from other miners and also be in charge of preventing illegal extraction of boulders, sand and gravel from the state’s rivers. 

This investigation by The Reporters’ Collective also reveals that the Uttarakhand government has continuously violated the Supreme Court order which requires the state to plough the money from riverbed mining in forests into conservation – a face saver device to compensate for the damage caused to forests by ecologically harmful activities like river mining. The state has not been doing so, documentary evidence shows.

Records reviewed during the investigation show that the Union government is well-aware of the violations by Uttarakhand but has not exerted its legal powers to stop the state government. 

The investigation brings together evidence of how the state has tweaked, bent and twisted environmental rules and regulations to benefit miners. The slew of orders and rules it has passed will potentially give a legal cover to illegal mining. Ironically, the state has greenwashed its actions by claiming such mining of rivers is necessary to prevent disasters in the eco-fragile Himalayas and also to generate revenue and employment.  Some of the evidence is being revealed in this report for the first time. Other pieces of evidence have been brought out earlier by The Reporters’ Collective and others.

The Collective sent detailed questionnaires to the Uttarakhand’s CM, its mining and forest departments on the processes followed by the state but has not received a response yet. We also sent queries to the Union ministry for environment, forests and climate change to seek clarifications on the violations and conflict of interest in Uttarakhand’s river mining regulations. We will update the copy when we receive a reply.

A few days after we sent queries to government departments, a report in Amar Ujala praised the state government’s mining policy for  transparency and record revenue collection.

No Face Saver Needed

The BJP is a cadre-based party that prides itself on discipline. In June this year, as the seasonal rivers of Uttarakhand dried up revealing the bed full of sediments which mining contractors contest for, the state’s BJP leadership broke in dissent. 

BJP’s former state Chief Minister and now its Member of Parliament from the hill state, Trivendra Singh Rawat, criticised the current state government under Chief Minister Pushkar Singh Dhami, for rampant illegal mining in Haridwar, his Lok Sabha constituency. He told the media, “While this (illegal mining) is causing hefty revenue losses to the state exchequer, it is causing even greater environmental damage.”

Giving his criticism of the BJP state government a cover, he added, “Our Prime Minister is very environmentally conscious and he wants to do a lot for environment protection.”

With politicians it’s often hard to tell if they are using an issue to score a point against rivals within the party, or for public good or both. The Reporters’ Collective investigated if his claims were supported by evidence. 

What we found was a slew of evidence of how the state government has established an elaborate regulatory regime which favours unchecked mining over ecology and environmental protection.

The reporter travelled to Uttarakhand and spoke to local businessmen engaged in mining and allied activities, civil society members and environmentalists about the health of rivers that are suffering from unabated mining. One such river is Gaula which flows through Haldwani, a city in Uttarakhand’s Nainital district.

Guala slows down and opens up as it hits the plains of Haldwani - the perfect place for miners to dig up the riverbed. 

“The river has been ruined by mining. A pillar of the Gaula bridge collapsed, the railway track near Haldwani railway station also got damaged in floods because the ground under it has been scooped out by mining,” alleged Mahesh Dutt, a local auto-driver from Haldwani.

The state’s neglect towards its rivers is also corroborated by official documents.

In 2008 the Supreme Court had set in place a mechanism to compensate for industrial projects, mining and infrastructure development that cause deforestation and ecological damage. It was termed as NPV or Net Present Value. A monetary compensation that project developers would pay for the damage their projects cause to forests. 

The idea of NPV was sold as a deterrent. If ecology and forests were being impacted, the consequent NPV it was imagined would send the project cost shooting up and the project developer would instead find a less ecologically-destructive site to operate from. 

But, in practice the NPV rates were set so low that the deterrent failed. The mechanism instead turned into a face-saver for governments to continue giving environmental clearances to project proponents at the same or higher frequency.

River-mining projects got a relaxation under the court orders. If the mining is happening outside of national parks and sanctuaries, NPV need not be collected from the miners. Instead the government is required to deploy the sale proceeds from the mined gravel, sand and boulders for forest conservation, the court decided. 

But state government records accessed by The Collective  show Uttarakhand has been running rampant river mining operations in violation of these Supreme Court orders for years. 

The state government’s Uttarakhand Forest Development Corporation (UKFDC) mines the rivers within the demarcated forest areas. Private players buy the mined material and pay royalty and other charges to the state government depending on the quantity of sand and gravel they take away in truckloads. They then make a killing by selling it to the construction industry. This royalty is the “sale proceeds” that the State earns from excavating  its rivers.

In violation of the Supreme Court orders, under instructions from the state government, the forest corporation and the state forest department get to keep only a small fraction of the royalty and other charges, not the entire amount. We reviewed government documents which show that in Nainital district’s three rivers- Gaula, Kosi and Dabka- the forest department and the corporation put together get only a portion from the sale of minerals. For Guala river, the forest department and corporation together got only 55.4% of state’s total earnings (Rs 162.6 out of Rs 293.5 for every tonne of riverbed material excavated) and for Kosi and Dabka rivers the two got 58.8% (Rs 166.8 out of Rs 283.8 per tonne). 

Records show, in the month of January 2023, the share of forest corporation and the forest department in the revenue earned from sale of minerals was further pared down. For Guala river the forest department and corporation earned only 49.6% of the earnings, and for Kosi and Daba rivers they got 50.75%. 

A part of even this share that goes to the forest department and the corporation is spent towards the expense of digging riverbeds for mining and not for conservation of forests, as the Supreme Court order required. 

Who knew?

The Union government has been well aware of the state operating the river mining business illegally – in violation of the Supreme Court orders, documentary evidence proves. 

Under India’s forest conservation law, the Union government’s prior approval is needed before any damaging activity is undertaken in forested areas. This includes mining of river beds in stretches where the rivers run through forested lands. These permits come with terms and conditions to protect forests and reduce harm.

UKFDC first secured a ten-year approval to mine Nainital district’s rivers from the Union environment ministry in early 2013. 

After the first approval period ended, as The Reporters’ Collective reported earlier, the state Chief Minister, Pushkar Singh Dhammi, made a show of coming to Delhi in February 2023 and lobbying the Union government for extending the mining permissions. 

The Union government happily granted Dhammi the favour of a five year extension. Dhami put up a photograph with the Union environment, forests and climate change minister on his public Facebook page saying, “As per the request made in the past, the Union government has extended mining approvals for four rivers of the state- Gaula, Dabka, Sharda and Kosi”. 

The extension was given without ascertaining whether earlier conditions imposed with the permissions had been followed to prevent damage to the environment. This was done despite the fact that the rivers were being mined inside the Shivalik Elephant Reserve - an area identified as important for conservation of the animal. 

Without looking at past performance, the new approvals came with yet more conditions. One of them stands out. The Union environment, forests and climate change ministry recommended that “the sale proceeds have to be used for protection/conservation of forests."

This was a formal acknowledgement by the Union government that it was well aware the state had been functioning in violation of the Supreme Court orders. In fact, the Union government was aware of exactly which Uttarakhand regulation had been put in place to breach the Supreme Court order. 

It reminded the state government of the Supreme Court’s order as well as its own guidelines and asked it to “examine the order…which shall be withdrawn immediately and entire sale proceeds of the collection of minerals shall be used for protection and conservation of forests only."

In bureaucratic language the Union government asked the state to correct itself in the future but did not speak to how the state BJP government had been acting in violation of apex court orders for the past decade. 

Even after Center’s warning in March 2023, Uttarakhand state has not withdrawn the orders. It continues to divert forest protection funds despite the missive from the Union government, state officials admitted. There is no evidence in public domain of the Union government having either taken any proactive steps to prosecute the state and its officials for violation of Supreme Court orders or having asked the state to recoup the money and give it retrospectively for forest conservation. 

What is lost?

What does forest conservation from sale proceeds of river mining entail? We asked a state administrative officer who has overseen the riverbed mining in the state and preferred to stay anonymous. 

“River mining damages the river ecology, the money should be utilised to protect that. There are elephant and tiger corridors in the forests of Nainital that need safeguarding and funds. The sale proceeds could have been used for forest-fire  and human-wildlife conflict prevention and compensation,” he said.

The state’s forests have been on fire this summer. Eleven people had died in the raging fires of Uttarakhand by the end of June, going by the state government’s report.

This year till June 28, Uttarakhand saw 845 incidents of fire in reserved forest areas. Out of these 95 were in Tarai East forest division where Gaula is mined, 45 in Ramnagar and Tarai West division where Dabka and Kosi are mined.

It is not only the share of royalty and other taxes on mining that have been denied for conservation  of Uttarakhand’s forests. 

The forest department also earns an income from the transit fee miners pay to transport the mined gravel, sand and boulders. This fee is mandated under the Indian Forest Act, which treats anything extracted from forestlands as ‘forest-produce’.

There have also been frauds and scams in the collection of this fee from the riverbed miners. In a 2019 report, after test checks (not even a complete audit) the national auditor found many such cases. 

A 2021 audit report found that  “ (The state government’s) agencies had allowed the contractors to use an estimated 37.17 lakh MT of mining material without transit passes.” In other words lakhs of tonnes of gravel, sand and boulders from the rivers were removed illegally at a cost to both, the environment and the exchequer. It also noted that the government had failed to collect other penalties adding up to a minimum of Rs 104.08 crore from the riverbed miners operating in the state. 

Outsourced environmental governance

One would imagine such criticism from the apex government auditor and evidence of scam would lead to investigations against officials and miners. Instead the state government has handed over its function of collecting royalty from miners and policing them to private companies. 

Uttarakhand’s mining rules notified in June 2023 state that the company selected to collect royalty will get priority rights over mining lease areas available to mine.

The collection of royalty from riverbed miners inside forest areas essentially requires running check-posts along the routes that miners use to drive away truckloads of boulders and gravel. This function by default has now been handed, by regulations, to private companies who get to bid to police the miners. 

We reviewed official correspondence which shows the company listing down the checkposts it wants to establish along roads to collect the taxes  in place of the forest department and the state’s revenue department. It demanded permission from the state government to establish and run these checkposts. 

We came across at least one case where the royalty collection has been outsourced to a Hyderabad-based private company, Power Mech Projects Limited. This was after the company emerged as the successful bidder in an e-bidding process to collect royalty from mined riverbed materials in four districts- Nainital, Haridwar, Udham Singh Nagar and Dehradun- for five years. The company will give a flat Rs 303.52 crore to the state against the royalty miners are to pay. The rest it will bag as its profits.  

Private companies operate to maximise their profits, not to regulate illegal mining or conserve the rivers. 

“A private company will collect royalty from local miners and transporters. Would this not lead to excessive mining, since the private company would want to recover the money it has paid to the government and earn profits on top of that?,” said a local transporter who picks up mined material from the bank of Gaula river in Haldwani and delivers it to stone crushers. He too preferred to stay anonymous. 

This provision potentially sits in violation of the NPV norms set by the Supreme Court: The works including the sale of boulders/silt are carried out departmentally or through Government undertaking or through the Economic Development Committee or Joint Forest Management Committee.

“The control of mining in forest areas should be with the Forest Department that should monitor the mining operations and the sale proceeds. But not only is that not happening, the state has invited private companies to do its job,” said the state official. “Such decisions regarding mining in forests have to be made by the forest department, not the mining department,” he added.

Records show, Power Mech Projects which had won the bid to collect royalties on behalf of the state government tied up with yet another private company to do so. In March, 2024, Kailash Riverbed Materials LLP, a limited liability partnership firm Power Mech had established with National Energy Trading and Services Limited, signed a five-year deal with the state government to collect royalty on mined riverbed minerals in four districts of the state. National Energy Trading and Services Limited was earlier known as Lanco Power Trading, a company connected to erstwhile Member of Parliament, Langdapati Rajgopal.  

“If someone does not pay royalty on the mined material, it is illegal mining which is a penal offence. Overseeing this is law enforcement. If the job is left to private hands, it’s like outsourcing a police station to a private company,” said Dushyant Mainali, a Haldwani-based lawyer who has worked extensively on illegal river mining in Uttarakhand. 

The regulations have even set up the state’s smaller businesses involved in the river mining supply chain against the outside corporations that are taking over the lucrative business in natural resources of the state. 

“Rules are being made to favour the rich stone crushers and big businesses. Small players like us will suffer under them,” the local transporter said.  

The state government has, the investigation found, institutionalised conflict of interest and not just privatised its regulatory functions. As a rule, it says the state will prioritise royalty-collecting private companies over others to also mine the rivers if they bid for it. 

“The government has said that the company hired for royalty collection will also have priority rights over mining. So, those mining will collect revenue and keep a check on their own activities. That is a clear conflict of interest,” said Dushyant Mainali.

The rivers of lucre continue to run for the miners in Uttarakhand. 

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