Minerals belong to the nation. The hole in the ground belongs to a district.
That asymmetry is the oldest problem in mining policy. Iron ore lifted out of Keonjhar is smelted somewhere else, sold somewhere else and taxed largely somewhere else, while Keonjhar keeps the dust, the truck traffic, the lowered water table and the displaced village. For most of independent India's mining history there was no mechanism that sent a defined share of that revenue back to the specific place that absorbed the damage.
On 17 September 2015 the Government launched the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) to close exactly that gap. On 17 September 2026 the scheme completed 11 years, and the Ministry of Mines published its running total: 4,70,020 projects sanctioned, worth ₹1,09,938 crore.
That number is worth pausing on. It is not a budget allocation. Not one rupee of it came from the Consolidated Fund of India. It is money collected from mining lease-holders, held in trust at the district level, and spent under district control.
The institution beneath the scheme: District Mineral Foundations
PMKKKY is not itself a fund. It is the spending framework for a fund, and the distinction matters because examiners test it.
The fund is the District Mineral Foundation (DMF), created by the Mines and Minerals (Development and Regulation) Amendment Act, 2015, which inserted a new section into the parent MMDR Act, 1957. A DMF is a non-profit trust, constituted in every district affected by mining-related operations, and it works "in the interest of persons and areas affected by mining".
Three features of the DMF decide most questions about it:
It is a State subject in operation. The DMF is created by central law but operates under the jurisdiction of the State Government, and each State frames its own DMF rules. This is why DMF practice differs so widely between Odisha and Rajasthan.
It collects at the district level. The money does not pool nationally and then get distributed. It accrues where the mine is.
It is now near-universal in the mining belt. DMFs have been established in 656 districts across 23 States.
PMKKKY then tells the DMF what to do with what it has collected. The MMDR Act requires States to incorporate PMKKKY into their DMF rules, so the framework is binding rather than advisory. Revised guidelines were issued in January 2024, updating how projects are planned and executed.
The funding formula, and the puzzle inside it
A mining lease-holder pays the State a royalty — an amount tied to the quantity of mineral extracted. The DMF contribution is calculated as a percentage of that royalty, not of turnover or profit:
- 10 per cent of royalty for mining leases, or prospecting licence-cum-mining leases, granted on or after 12 January 2015
- 30 per cent of royalty for mining leases granted before 12 January 2015
Students routinely get this backwards, because the instinct is that newer leases should carry the heavier social obligation. The logic runs the other way, and it is worth understanding rather than memorising.
12 January 2015 is the date the MMDR Amendment Ordinance took effect and made auction the method of granting mineral concessions. A lease won at auction has already surrendered a large share of the mineral's value to the State through the winning bid — an auction premium paid on top of royalty. A lease granted before that date was allotted administratively, at royalty rates alone, with no competitive bid capturing the resource rent. The older lease-holder is therefore getting the mineral considerably cheaper, and the higher DMF rate claws back part of that gap.
One rate for the auction era, a triple rate for the allotment era. The asymmetry is the point.
It also helps to keep the three separate levies distinct, because a question can name any one of them:
| Levy | Goes to | Broad purpose |
|---|---|---|
| Royalty | State Government | General revenue from extraction |
| DMF contribution | District Mineral Foundation | Welfare of mining-affected areas |
| NMET contribution (2% of royalty) | National Mineral Exploration Trust | Funding regional and detailed exploration |
The NMET was created by the same 2015 amendment. Royalty, DMF and NMET together are the standard three-part answer.
Where the money is allowed to go
PMKKKY divides permitted spending into two baskets, and fixes the proportions:
High-priority sectors — at least 70 per cent of funds Drinking water supply; environment preservation and pollution control; health care; education; welfare of women and children; welfare of the aged and the differently abled; skill development and livelihood generation; sanitation; housing; agriculture; animal husbandry.
Other priority sectors — up to 30 per cent of funds Physical infrastructure; irrigation; energy and watershed development; and any other measure that raises environmental quality in the mining district.
Read the two lists side by side and the design intent is visible. The 70 per cent basket is almost entirely human development — water, health, education, livelihoods. The 30 per cent basket is construction. The rule exists because construction is what district administrations naturally gravitate towards: a road is visible, measurable and quick to inaugurate, while a skilling programme is none of those things. The floor of 70 per cent is a guard against a fund meant for people being spent mostly on concrete.
A related discipline in the guidelines is that the bulk of the money must be spent in directly affected areas — the villages that lost land, water or air quality — rather than diffused across the whole district. Mining damage is intensely local, and a fund that averages it across a district stops reaching the people who paid the price.
The constitutional layer: Scheduled Areas
India's mineral belt and India's tribal belt are very nearly the same map. Jharkhand, Odisha, Chhattisgarh and the eastern districts of Madhya Pradesh hold both the ore and a large share of the Scheduled Tribe population. This overlap is not incidental to PMKKKY; it shapes how the scheme must operate.
When a State frames its DMF rules, it is required to follow:
The constitutional provisions on Scheduled and Tribal Areas — the Fifth Schedule for most mining States, the Sixth Schedule in the North-East.
The Panchayats (Extension to the Scheduled Areas) Act, 1996 — PESA. PESA extends Part IX of the Constitution to Fifth Schedule areas with modifications, and gives the Gram Sabha a defined role, including consultation before land acquisition and before the grant of prospecting licences or mining leases for minor minerals.
The Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 — FRA. The FRA recognises individual and community forest rights, including community forest resource rights, and its consent requirement in forest diversion cases is the practical check on mining expansion into forest land.
This is a productive cluster for revision, because the three instruments answer three different questions. The Fifth Schedule asks who administers the area. PESA asks who must be consulted before a decision. The FRA asks whose pre-existing rights the decision would extinguish. Questions in this area usually test which of the three is doing the work in a given situation.
Detailed guidance on the wider framework sits in our CDS/OTA economy notes on industry and services.
What 11 years produced
The Ministry's figures, as on July 2026:
| Project status | Number of projects | Amount (₹ crore) |
|---|---|---|
| Sanctioned | 4,70,020 | 1,09,938 |
| Completed | 2,92,156 | 49,973 |
| Ongoing | 78,809 | 30,512 (committed) |
Two ratios in that table repay attention.
Completion rate by count is high; by value it is not. About 62 per cent of sanctioned projects are complete, but they account for only about 45 per cent of sanctioned value. Small works finish; large works linger. That is a familiar pattern in district-level capital spending and not in itself a scandal, but it is the honest reading of the table.
Sanctioned is not spent. ₹1,09,938 crore sanctioned, against ₹49,973 crore in completed projects and ₹30,512 crore committed to ongoing ones. The gap between what a fund has authorised and what has actually reached the ground is the recurring criticism of the DMF mechanism, and it is a fair one. Several high-collection districts have historically carried large unspent balances, partly for want of technical capacity to design and supervise projects at district scale.
The other structural feature to state plainly is concentration. DMF collections follow ore, and ore is not evenly distributed. A small number of districts in Odisha, Jharkhand, Chhattisgarh and Rajasthan account for a very large share of national DMF accruals, while a district with one small quarry collects almost nothing. The DMF is by design a local redistribution instrument, not a national equalisation one — it moves money from the mining company to the mining district, not from the rich mining district to the poor non-mining district. Confusing the two is the most common analytical error in answers on this topic.
🔑 Revision block
The anniversary. PMKKKY launched 17 September 2015; completed 11 years on 17 September 2026.
The fund. District Mineral Foundation (DMF) — a non-profit trust, created by the MMDR (Amendment) Act, 2015 amending the MMDR Act, 1957; constituted in every mining-affected district; operates under State Government jurisdiction; each State frames its own DMF rules. Set up in 656 districts across 23 States.
The scheme. PMKKKY is the spending framework; the DMF is the fund. States must incorporate PMKKKY into their DMF rules. Revised guidelines: January 2024.
The rates. 10 per cent of royalty for leases granted on or after 12.01.2015; 30 per cent for leases granted before that date. The older lease pays three times more because it was granted without auction.
The three levies. Royalty → State. DMF contribution → district. NMET, 2 per cent of royalty → National Mineral Exploration Trust, for exploration. All three flow from the MMDR framework.
The 70:30 rule. At least 70 per cent to high-priority sectors — drinking water, environment and pollution control, health, education, welfare of women and children, welfare of the aged and differently abled, skill development and livelihoods, sanitation, housing, agriculture, animal husbandry. Up to 30 per cent to other priority sectors — physical infrastructure, irrigation, energy, watershed development, environmental quality.
The safeguards. Fifth Schedule (and Sixth Schedule in the North-East) · PESA, 1996 — Gram Sabha consultation in Scheduled Areas · FRA, 2006 — recognition of individual and community forest rights.
The numbers, July 2026. Sanctioned 4,70,020 projects / ₹1,09,938 crore. Completed 2,92,156 / ₹49,973 crore. Ongoing 78,809 / ₹30,512 crore committed.
The honest caveats. Sanction outruns spending; completion is higher by count than by value; collections are concentrated in a few ore-rich districts. DMF redistributes company → district, not rich district → poor district.
🎯 Practice MCQs
Q1. The District Mineral Foundation was introduced through an amendment to: (a) The Coal Mines (Special Provisions) Act, 2015 (b) The Mines and Minerals (Development and Regulation) Act, 1957 (c) The Mines Act, 1952 (d) The Land Acquisition Act, 2013
→ (b) — the MMDR (Amendment) Act, 2015 amended the 1957 parent Act.
Q2. For a mining lease granted before 12 January 2015, the contribution to the DMF is: (a) 10 per cent of royalty (b) 20 per cent of royalty (c) 30 per cent of royalty (d) 2 per cent of royalty
→ (c) — the higher rate applies to the older lease, granted without auction.
Q3. Under PMKKKY, the minimum share of funds reserved for high-priority sectors is: (a) 50 per cent (b) 60 per cent (c) 70 per cent (d) 80 per cent
→ (c) — with up to 30 per cent for other priority sectors.
Q4. Which of the following is classified as an "other priority" sector under PMKKKY? (a) Drinking water supply (b) Health care (c) Irrigation (d) Skill development
→ (c) — irrigation sits in the 30 per cent basket; the other three are high-priority.
Q5. The National Mineral Exploration Trust receives: (a) 2 per cent of royalty (b) 10 per cent of royalty (c) 30 per cent of royalty (d) A share of the auction premium
→ (a) — 2 per cent of royalty, earmarked for exploration.
Q6. PMKKKY was launched in: (a) September 2014 (b) September 2015 (c) January 2015 (d) January 2024
→ (b) — 17 September 2015. January 2015 is the auction cut-off date; January 2024 is when revised guidelines were issued.
Q7. The Panchayats (Extension to the Scheduled Areas) Act, 1996 is relevant to mining primarily because it: (a) Prohibits all mining in Scheduled Areas (b) Gives the Gram Sabha a defined role in consultation before certain land and mineral decisions (c) Transfers mineral ownership to tribal communities (d) Fixes royalty rates for minor minerals
→ (b) — PESA creates a consultation right, not a mineral ownership right or a blanket prohibition.
Q8. DMFs have been set up in approximately: (a) 656 districts across 23 States (b) 400 districts across 15 States (c) 780 districts across 28 States (d) 250 districts across 12 States
→ (a)
Q9. Which statement best describes the redistributive character of the DMF? (a) It transfers funds from mineral-rich States to mineral-poor States (b) It transfers funds from mining lease-holders to the districts affected by their mining (c) It transfers funds from the Consolidated Fund of India to mining districts (d) It transfers funds from the Centre to State Governments
→ (b) — it is a company-to-district transfer, with no Consolidated Fund outlay and no inter-State equalisation.
Q10. Consider the following statements about PMKKKY: 1. It is implemented by the District Mineral Foundations using funds accruing to them under the MMDR Act. 2. Its funds form part of the Union Budget's scheme expenditure. Which is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2
→ (a) — statement 2 is the standard trap. PMKKKY spends statutory contributions held by district trusts, not Budget allocations.
📋 How this gets asked (PYQ pattern)
Mining questions in CDS and OTA papers have migrated over the last decade from geography to governance. The older pattern asked where — which State leads in bauxite, which district in iron ore. The newer pattern asks who decides and who gets paid.
Three question shapes recur. The first is the instrument-matching question: a stem describes a fund or a trust and asks which statute created it, with DMF, NMET, the Compensatory Afforestation Fund and the National Clean Energy Fund as the distractor set. The second is the percentage question, which is where the 10/30 royalty split and the 70:30 spending split both live — and where the pre-2015/post-2015 inversion does most of its damage. The third is the tribal rights question, which places PESA, the Fifth Schedule and the FRA in one options list and asks which applies to a described situation.
A single table covering statute, year, levy rate and beneficiary handles all three shapes. Build it once for royalty, DMF and NMET, add PESA and FRA as the consent-and-consultation layer, and this entire topic becomes mechanical.
Preparing for CDS or OTA? Scheme questions reward students who learn the mechanism — who pays, who holds, who spends — rather than the slogan. Build the base with our CDS/OTA economy notes, follow the daily CDS/OTA current affairs, and prepare with our faculty in the upcoming Cavalier courses in Delhi.
✍️ Written by Aditya Tiwari — Economy & polity faculty at The Cavalier. Reviewed by the Cavalier Faculty Desk.