Jason Miklian and Scott Carney’s “Fire in the Hole” published in the Foreign Policy magazine is on India’s Naxalite insurgency but it also discusses illegal coal mining in Jharkhand (since it is a connected issue) and gives us some estimates. Even though I’d recommend the reader to read the entire article, I’m attaching the relevant excerpt here:
Kumar comes from a long line of Jharkhandi robber barons. In the 1980s, he used his mining camps as staging grounds for stalking the region’s near-extinct Bengal tigers. Today he owns a series of profitable but (by his own admission) illegal coal mines, hidden in the palm forests. Legal mines extract ore with giant machines that carve craters to the horizon; Kumar’s are more like secret caves, the coal dug out of deep tunnels with pickaxes by day laborers working for $2 to $3 a day. He told us his revenues run about $4 million a year, typical for off-the-books operations in a state where less than half of raw materials are extracted legitimately.
On July 4, 2004, Kumar was closing out the day’s accounts in his makeshift office at one of his mines when seven female guerrillas carrying automatic rifles broke down his door, forcing him into the forest at gunpoint. They marched him to a riverbed, where they stopped and held a gun to his head. “I thought I was going to die,” he recalls. Instead they demanded $2.5 million for his ransom.
Through the night, the Maoists marched him barefoot over crisscrossing trails, until they happened across a police patrol that was searching for him. Kumar escaped in the ensuing gun battle. But after he returned to work several weeks later, Maoist negotiators knocked on his door and let him know he was still a target. So, Kumar told us, he quickly hashed out a business arrangement with the rebels: In exchange for their leaving his operation alone, he would pay them 5 percent of his revenues.”
The protection money, like the small bribes Kumar says he pays to the police to avoid troublesome safety and environmental regulations, has simply become another operating cost. Kumar says that every mine owner he knows pays up, too. By his back-of-the-envelope approximation, if the other estimated 2,500 illegal mines in the state are doling out comparable kickbacks to the rebels, the Maoists’ annual take would come to $500 million — enough to keep a militant movement alive indefinitely. “It works like a tax,” he says with a Cheshire grin, “just another business expense and now everything runs smoothly.”
(emphasis mine)
This is roughly inline with the estimates I’ve heard from others. My conversations with some of my acquaintances have taught me that their conversations with their acquaintances and relatives working at mining companies (it is important to note the multiple degrees of separation involved here) reveals that only 1-50% of mining is on-books (being conducted legally), which means that the government isn’t receiving royalties for the rest of the illegal mining (50-99% of total).
UPDATE (26 November 2022): I acknowledge that such estimates aren’t very reliable, so I plan on looking at multiple other ways to estimate the illegal mining activity taking place. This includes looking at consumption estimates and customs data: If one can exploit any one point in the supply chain to find the actual consumption of a mineral, we’ll have a better sense of the level of illegal mining. For example, estimates of cement consumption can let us know the extent to which illegal riverbed sand mining is taking place. This method might not be successful if a lot of illegally mined minerals end up being exported abroad, since they won’t show up in the consumption estimates. But then we could also look up export and import data to figure out discrepancies. All-in-all, I think, without even reading a page of literature estimating the level of illegal mining, that there can be multiple ways to estimate the levels and I’ll explore each in future posts.