District Mineral Foundation (DMF): ₹1 Lakh Crore, Rules and PMKKKY

Overview

The District Mineral Foundation is a statutory non-profit trust established under Section 9B of the Mines and Minerals (Development and Regulation) Act, 1957, designed to channel mining revenue directly into social infrastructure, environmental restoration, and socio-economic welfare for local communities enduring the ecological and health impacts of mineral extraction. Funded through mandatory royalty contributions from mining leaseholders, the institution operationalises local benefit-sharing to reverse the historical "resource curse" across mineral-bearing regions. However, persistent implementation challenges—including bureaucratic centralisation, unspent fiscal balances, and inadequate consultation with grassroots institutions—continue to test its transformative governance potential.

As of January 2025, cumulative collections across 645 District Mineral Foundations reached ₹1,04,251 crore, according to the Ministry of Mines. This substantial capital pool establishes the District Mineral Foundation (DMF) as one of India's most significant sub-district developmental funding mechanisms.

The institutional framework translates industrial resource extraction into tangible local development. Out of the total collections, authorities have sanctioned ₹88,483 crore across 3.69 lakh individual projects, with actual expenditure standing at ₹55,924 crore across 2.08 lakh completed projects. These investments target historically neglected mining tracts that bear severe ecological degradation, air pollution, and groundwater depletion.

To accelerate developmental impact in underperforming regions, the Ministry of Mines launched the Aspirational DMF Programme in July 2025. This initiative directly converges DMF funding with NITI Aayog’s Aspirational Districts Programme (ADP) and Aspirational Blocks Programme (ABP). This structural alignment ensures targeted resource allocation in the country's most vulnerable socio-economic geographies.

The District Mineral Foundation is a statutory non-profit trust established by State Governments in every district affected by mining-related operations. Its core statutory mandate, defined under Section 9B(2) of the Mines and Minerals (Development and Regulation) (MMDR) Act, 1957, is to work for the interest and benefit of persons and areas affected by mining.

From an ethical and constitutional standpoint, the DMF framework addresses the paradox of plenty (or resource curse). Mining regions frequently generate immense macroeconomic wealth while local tribal and rural populations face displacement, poor healthcare, and loss of livelihoods. By legally ring-fencing local mineral revenues, the DMF framework operationalises the public trust doctrine and intergenerational equity, principles upheld by the Supreme Court of India in cases such as Goa Foundation v. Union of India.

Aspirants must distinguish the District Mineral Foundation from the National Mineral Exploration Trust (NMET). While both were established under the 2015 amendments to the MMDR Act, their institutional mandates, revenue channels, and geographic scopes differ entirely.

Section 9B of the MMDR Act, 1957, inserted through the MMDR Amendment Act, 2015, provides the legal foundation for DMFs across India. The statute establishes DMFs as autonomous district trusts, leaving specific institutional rules, governing structures, and administrative procedures to state-level discretion.

The governance architecture of a DMF typically comprises a two-tier structure:

1. Governing Council: A policy-setting body responsible for reviewing annual plans, approving project allocations, and monitoring overall financial expenditure.
2. Managing Committee: An executive body responsible for day-to-day project execution, fund management, and processing administrative approvals.

To address governance bottlenecks and political representation, the regulatory landscape underwent significant legislative refinement:

• Central Directing Power: The MMDR Amendment Act, 2021 inserted a proviso to Section 9B(3), empowering the Central Government to issue binding directions regarding the composition and utilization of DMF funds.
• Legislative Representation: On 23 April 2021, the Ministry of Mines issued a statutory order requiring State Governments to include Members of Parliament (MPs), Members of Legislative Assemblies (MLAs), and Members of Legislative Councils (MLCs) in DMF Governing Councils.

Mining leaseholders must make mandatory statutory payments to their respective District Mineral Foundations, calculated as a defined percentage of their regular mineral royalty payments. The contribution rates are strictly governed by the Mines and Minerals (Contribution to District Mineral Foundation) Rules, 2015.

The collection framework differentiates between leases based on the allocation date and procurement method:

• Pre-2015 Mining Leases: Holders of mining leases granted prior to 12 January 2015 must contribute 30% of the royalty amount to the DMF.
• Post-2015 Auctioned Leases: Holders of mining leases granted on or after 12 January 2015 through competitive bidding contribute 10% of the royalty amount.
• Minor Mineral Concessions: Section 15A of the MMDR Act, 1957 empowers State Governments to formulate separate rules prescribing contribution rates payable by minor mineral concession holders.

The legal timing of these levies was settled by the Supreme Court of India in Federation of Indian Mineral Industries (FIMI) v. Union of India (2017). The Court ruled that liability to contribute to the DMF cannot be applied retrospectively before the formal notification date of the state rules or the trust's actual establishment.

The Ministry of Mines framed the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) on 16 September 2015 under Section 20A of the MMDR Act. This national directive mandates State Governments to integrate developmental guidelines directly into their state DMF rules to prevent misdirection of funds.

PMKKKY enforces a clear division between basic human development sectors and broader physical infrastructure. In January 2024, the Ministry of Mines notified Revised PMKKKY Guidelines, updating the spending thresholds to prioritize communities directly affected by mining.

The revised 2024 framework also requires that at least 70% of funds be deployed exclusively within directly affected areas—villages within immediate proximity to mining leases—before allocating resources to indirectly affected peripheral zones.

Despite substantial revenue generation, District Mineral Foundations face structural implementation bottlenecks across several states. These issues stem from bureaucratic centralisation, non-compliance with planning mandates, and attempts by state executives to repurpose local trust funds.

A performance audit by the Comptroller and Auditor General of India (CAG) on the implementation of PMKKKY and DMFT in Chhattisgarh highlighted these systemic gaps. The audit revealed that 44% (754 of 1,734) of directly affected villages remained uncovered by any DMF projects, while funds were spent ad hoc without the mandatory annual perspective plans.

Major institutional challenges include:

• Bureaucratic Centralisation: District-level managing committees are often dominated by administrative officers and local political representatives, sidelining affected tribal and rural communities.
• Neglect of Panchayati Raj Institutions: Despite legal protections under the PESA Act, 1996 and the Forest Rights Act (FRA), 2006, Gram Sabhas are frequently bypassed during project identification and social audit processes.
• Fund Diversion and Central Interventions: Several State Governments attempted to pool district revenues into State Consolidated Funds or Chief Minister Relief Funds. This prompted the Central Government to issue a binding directive on 12 July 2021 prohibiting any transfer of DMF funds away from district trust accounts.
• Large Unspent Balances: Administrative delays in drafting detailed project reports (DPRs) and issuing work orders have led to substantial gaps between sanctioned amounts and actual ground-level expenditure.

Strengthening District Mineral Foundations requires structural reforms in bottom-up planning, statutory accountability, and community participation. The Revised PMKKKY Guidelines (2024) provide a framework to address these operational challenges.

To maximise developmental outcomes, implementation should focus on key institutional priorities:

1. Strengthening Grassroots Consent: In Scheduled Areas under Article 244 and the Fifth and Sixth Schedules, project selection must involve genuine consultation and approval from Gram Sabhas pursuant to the PESA Act, 1996 and FRA, 2006.
2. Institutionalising Oversight: State Governments must operationalise the State Level Monitoring Committee chaired by the Chief Secretary, while enforcing mandatory annual financial audits by the Comptroller and Auditor General (CAG).
3. Strategic Convergence: District administrations should utilize the Aspirational DMF Programme framework to integrate mineral funds with national health, education, and nutrition indicators.
4. Mandatory Social Audits: Setting up independent social audit units at the block level will ensure public transparency, curb corruption in infrastructure procurement, and guarantee that benefits reach directly affected families.

• Statutory Authority: Established as non-profit trusts under Section 9B of the MMDR Act, 1957 (inserted via the 2015 Amendment) to benefit mining-affected populations.
• Contribution Formulas: Leaseholders pay 10% of royalty for post-2015 auctioned leases and 30% of royalty for pre-2015 leases; minor mineral rates are set by State Governments under Section 15A.
• PMKKKY Spending Mandates: The Revised 2024 Guidelines require at least 70% allocation to High Priority sectors (drinking water, health, education, environment) and cap Other Priority infrastructure at 30%.
• Financial Scale: As of January 2025, cumulative DMF collections exceeded ₹1,04,251 crore, with actual ground expenditures standing at ₹55,924 crore.
• Governance Safeguards: Central directives prohibit transferring DMF funds to State Consolidated Funds, while the 2024 rules mandate CAG annual financial audits and compliance with PESA and Forest Rights Act provisions.