The Industry and Entrepreneurship Development Ministry acknowledged yesterday (7) that it did not carry out a direct assessment to determine whether the economic benefits that Sri Lanka receives from mineral extraction and imports outweigh the related environmental, social, and economic impact and resource depletion costs before drafting this year’s National Mineral Policy.
Subject Minister Sunil Handunnetti also said the Ministry is now taking steps to eliminate corruption and irregularities in the mining sector, including alleged misconduct involving certain officials of the Geological Survey and Mines Bureau (GSMB).
The disclosure was made in Parliament yesterday, in response to a question raised by Opposition Parliamentarian Shanakiyan Rasamanickam.
In June, Rasamanickam had questioned whether the Government had conducted an independent assessment before formulating the 2026 Policy to determine if the economic returns generated from mineral extraction and imports exceed the environmental damage, social costs, and depletion of non-renewable resources associated with such activities.
Responding, Handunnetti admitted that no such direct study had been undertaken. "The Government has not directly studied the extent to which the costs of resolving environmental and social issues, together with resource depletion, outweigh the value gained from the domestic use of minerals or the revenue earned through exports."
However, he said that the new Policy had been developed in consideration of several other factors. "The Policy was formulated after reviewing the National Policy introduced in 1999, regulations issued over the years, recommendations made in 2012 on value addition to mineral exports, reports containing data on the domestic industrial demand, global trends, and observations made over the past two and a half decades by environmental groups, social stakeholders, and State institutions responsible for environmental protection," he said, adding that these reviews identified the need for a more effective mineral Policy.
He also revealed that the GSMB had issued 471 mineral exploration licences throughout the past. He said that exploration licences were previously valid for a maximum of 10 years, but that that period had later been reduced to five years. "Despite these limits, many companies have been retaining exploration areas for much longer periods. We have observed that many companies obtained licences and remained in the sector for 15 or even 18 years, continuing to hold exploration areas under their control," he said. Handunnetti added that although companies are expected to complete exploration and proceed to mining and value addition to maximise benefits to the national economy, only about 28 mining licences have been issued so far. "Of those, only around five projects are actually engaged in mining operations. Three of those are State-run operations — Mineral Sands, the Eppawala Phosphate Project, and the Kahatagaha Graphite Mine. Only two are operated by private companies." Speaking further, he claimed that many companies had prolonged exploration licences without properly exploring mineral reserves or moving into commercial mining. He noted that these companies had also been unable to recover the substantial investments made on exploration activities because mining had never commenced. Although there is no direct evidence, he said that there is reason to believe that some companies have instead benefited by using exploration licences to enhance their market value. "Rather than focusing on exploration and mining, some companies use the fact that they possess a Government-issued exploration licence to increase the value of their shares in stock markets in Sri Lanka, China, or India."
Under the new Policy, he said that licences would be given only to companies that are capable of carrying out all four stages — exploration, mining, processing, and value addition.
Rasamanickam then referred to a 2017 Supreme Court determination, saying that, according to the ruling, existing exploration licences could be cancelled. He said that minerals are non-renewable resources and urged the Government to revoke all current licences before issuing new ones under the 2026 policy. "Once these minerals are extracted, they can’t be replaced. My request is that all existing licences be cancelled and future approvals be granted only after proper Initial Environmental Examinations and Environmental Impact Assessments are conducted in line with the new Policy," he said.
Responding, Handunnetti said that he agreed with the proposal in principle. "I completely agree with that suggestion. All existing licences are now being examined by a special committee. Decisions on those licences will be taken after considering the committee's recommendations. I agree with your proposal, but, the final decision will be made by the experts," he said.
He further alleged that the licensing system had been compromised over the years. " In previous Governments, Directors General of the GSMB issued licences and later became consultants to those same companies. Former Chairpersons and former officials of the Bureau are now serving as consultants. This entire system has to be cleaned up." He stressed that simply transferring officials from one District to another would not solve the problem.
"Moving an officer from Batticaloa to Hambantota and another from Hambantota to Batticaloa will not change anything. The person leaving simply hands over the list and says, 'I earned this much from these licences. Don't reduce it.' That is the reality," he alleged. "Even if we summon all 25 officers (a possible reference to GSMB District Officials) every month and question them with reports, photographs, and video recordings, the situation does not change. Many experienced professionals have already left the country, and there are not enough new recruits. That is one of the main problems," he said.
He further disclosed that a request has been made to the President to establish a dedicated task force to implement reforms in the mining sector. "We need a separate Task Force. The Special Task Force (STF) should also be deployed where necessary. Closed circuit television (CCTV) camera surveillance must be installed at sand mining sites. Otherwise, it will be impossible to eliminate the sand mafia. Some people obtain a licence for one tipper load of sand but transport four loads using the same permit," he alleged.