Comparison of benefits from operationalization of Hartwick rule vis-Ã -vis creation of permanent fund in Odisha between 2007 and 2017
Student name: Ms Ritu Ahuja
Guide: Dr Nandan Nawn
Year of completion: 2018
Host Organisation: TERI School of Advanced Studies
Abstract: A common phenomenon observed in mineral rich regions across the globe is how despite increasing revenue from mining activities, these regions tend to remain backward on accounts of basic human development indicators. States in India experience the same. Odisha, which gets about 12 percent of its Gross State Domestic Product from mining activities, has 27 out of 30 districts listed as backward. The glaring contradiction between increasing mining revenue and depleting wellbeing must be addressed. This study looks at two alternative approaches which aim at achieving sustainability in mining for local populations by way of using resource rents; Hartwick rule which aims at creating compensatory capital for the benefit of local livelihoods and Permanent Fund which aims at distributing cash dividend to local populations. The objective of this study is to compare the benefits arising from each of the approaches.
The study finds that the rent amount accrued from mining of Iron ore by Odisha Mining Corporation for the period of the study is Rs. 70,000 lakhs. When accrued to one particular district- Keonjhar, this amount is about Rs. 41,500 lakhs. When used under the Hartwick rule, for compensatory capital formation to take place in health sector, this amount can lead to additional 240-260 more individuals receiving healthcare facilities in primary and community health care centers. When used under the Permanent fund, this rent can result in each individual receiving about Rs. 12,000 on an average per year. It is argued that implementation of Hartwick rule is a more beneficial longer term solution than permanent fund.
Keywords: Resource Rents, Hartwick Rule, Permanent Fund, Odisha
