• Irregularities in issuing mining licences cast doubt on regulatory oversight and potential corruption

Illegal gem and mineral mining has spiralled into a nationwide crisis, bleeding millions from State revenue while wreaking havoc on the environment.

The latest audit reports from the National Audit Office (NAO) have uncovered extensive irregularities in the issuance of mining licences, casting serious doubt on regulatory oversight and potential corruption.

Meanwhile, environmentalists warn that unchecked mining is causing irreversible damage to ecosystems. As authorities turn a blind eye, the country continues to suffer both economically and ecologically, fuelling outrage over who truly benefits from this illicit industry.

NAO revelations on NGJA irregularities 

The National Gem and Jewellery Authority (NGJA), the primary regulatory body overseeing Sri Lanka’s gem industry, is facing scrutiny over its alleged involvement in gem mining activities.

A recent audit by the NAO has revealed that despite legal provisions prohibiting direct mining engagement, the authority was involved in a mining project during the reviewed year. This has sparked concerns over regulatory breaches, conflicts of interest, and misinterpretation of the law.

According to Section 15(1) of the NGJA Act No.50 of 1993, the NGJA holds exclusive authority over the issuance of licences for the gem industry in Sri Lanka.

However, concerns have been raised regarding the authority’s direct involvement in gem mining activities, which the Attorney General’s Department has deemed inconsistent with the act. Despite this legal standpoint, an official audit has revealed that a gem mining project was carried out during the reviewed year, raising serious questions about regulatory compliance. 

In response to these concerns, the NGJA has defended its role, stating that it does not engage in gem mining itself but instead supervises third-party operations. According to the authority, such activities are undertaken by local ‘Samurdhi’ community-based organisations and the NGJA’s role is limited to oversight.

The authority claims it ensures that all mined gems are properly documented and auctioned, and that the appropriate royalties are collected as per Section 18(2) of the act, with the approval of the Board of Directors. This justification implies that while the NGJA does not mine directly, it facilitates and monitors the process to ensure compliance and revenue collection. 

The issue has led to a divergence of legal opinions. Some experts argue that any level of involvement by the NGJA in gem mining contradicts its primary regulatory function, while others contend that the authority’s oversight role does not equate to direct mining.

Ultimately, the Attorney General’s Department has ruled that while the NGJA cannot actively engage in mining operations, there is no legal obstacle to issuing mining licences to third parties under Section 15(1) and establishing agreements to collect royalties from extracted gems under Section 18(2). This clarification essentially permits the NGJA to facilitate mining activities through third parties, provided it does not partake directly. 

Nevertheless, the NAO has recommended that the NGJA should strictly adhere to the provisions of the act and avoid any form of direct involvement in gem mining.

The NAO has also uncovered discrepancies regarding the closure and restoration of gem mining sites. 

According to Paragraph 7 of internal circular No. NGJA/16.2/2018/Bachoe iii dated 29 August 2018, the NGJA is required to claim security deposits to restore land after gem mining and excavation. 

The circular has also mandated that abandoned and dangerous mines, which have been left in harmful conditions for the environment, must be closed and restored within two months after the revocation of the mining licence. However, during a sample inspection, 19 such mines were found not to have been properly closed or restored.

Further investigation has revealed that these mining sites, which had been used for gem mining as well as other activities like sand or soil excavation about a decade ago, lacked specific records detailing the individuals who had obtained the licences. As a result, the NGJA was directed to close these mines and take appropriate action.

The circular’s regulations clearly state that mines must be properly closed and the land must be restored to its original state. To ensure this, an adequate security deposit should be collected from licence holders. 

In its response, the NGJA has stated that when issuing gem mining licences, a special security deposit is charged for the restoration of mined sites. By the end of the reviewed year, the total amount of unclaimed security deposits stood at Rs. 1,377,385,852, raising questions about whether the proper regulations had been followed to guarantee the restoration of these gem mines and the land they occupy.

The security deposits for traditional mines were also highlighted in the audit, showing that a deposit of Rs. 10,000 per mine was charged from 22 March 2023, a significant increase from the previous deposit of Rs. 4,500 per mine. 

Despite the higher deposit amount, miners had closed traditional mines but had failed to reclaim their deposits, resulting in a growing balance of unclaimed funds. This imbalance underscores the issue of insufficient regulation to ensure proper restoration and restructuring of the land in line with the provisions of the act.

Environmentalists raise concerns 

In such a backdrop, environmentalists are sounding the alarm over the widespread destruction caused by large-scale illegal mining operations across Sri Lanka. 

Sajeewa Chamikara of the Movement for Land and Agricultural Reform (MONLAR) stressed that the damage was not limited to traditional gem mining regions like Ratnapura but had spread across the country. 

“This doesn’t just affect Ratnapura but all other areas as well,” Chamikara said. “Earlier, mining was done manually, but now all activities are carried out using heavy machinery, which severely impacts the entire environment and disrupts the ecological balance.”

He urged the Government to take immediate action to curb illegal mining and called for stricter financial regulations to hold miners accountable for environmental rehabilitation. “The current deposit fee for a mining licence should be increased so that licence holders take responsibility for rehabilitating the land. If they want to reclaim their deposit, they should be required to restore the area after mining,” he said. 

Chamikara also criticised the regulatory oversight of the NGJA, questioning its ability to enforce compliance. “The NGJA issues licences and is also responsible for post-licensing monitoring. But how can we rely on it when it is the same entity granting the licences?” he questioned, suggesting that an independent regulatory body was necessary to prevent conflicts of interest and ensure stricter enforcement. 

When contacted, NGJA Director of Export Services and Export Marketing T.M.A.P.K. Thennakoon told The Sunday Morning that the issues regarding licensing and environmental concerns were not within his jurisdiction and advised reaching out to the Land, Mining, and Environment Division of the NGJA. 

However, attempts to contact NGJA Chairman/CEO Naveen Sooriyarachchi and Land, Mining, and Environment Division Deputy Director S.N.C.B. Samarasinghe were unsuccessful.

Audit revelations on GSMB issues

Similarly, the audit report on the Geological Survey and Mines Bureau (GSMB) has highlighted several issues regarding the expiration and renewal of exploration licences. 

The exploration licence (No. EL/406) granted to Lanka Mineral Sands Ltd. had expired on 30 December 2022. According to regulations, the company had a two-year window after expiration to apply for a mining licence or retain the area by paying the relevant fees. 

However, the company had not completed the necessary exploration reports and the licence had expired without action. Despite this, the GSMB had issued a new exploration licence (No. EL/434) to another private company for the same area.

The GSMB has explained that Lanka Mineral Sands had been given periodic extensions over 10 years, but had failed to submit any progress reports for the allocated area. As per the decisions of the Ministry of Industries and Ministry of Environment, the company was given six months after the expiration date to claim the rights to the land, but this had not happened. 

Consequently, the area was awarded to another company, although it was later found that the area was part of a wildlife zone, making it unsuitable for further exploration.

The audit has also uncovered issues related to phosphate exploration. The GSMB had failed to comply with a 2000 court ruling requiring a survey of phosphate minerals in Sri Lanka before any agreements were made. A 22-year delay followed, and in June 2023, the bureau had published a report on phosphate mines in Eppawala without proper approval from the National Science Foundation or National Academy of Sciences. 

Despite this, the bureau had granted export licences to private companies, allowing them to export phosphate before receiving the necessary approvals. The audit has suggested that the GSMB had not followed the correct legal procedures in issuing export licences, recommending that the Ministry of Industry follow an open tender process when selecting phosphate exporters.

Notably, there has been a dramatic decline in the enforcement of illegal mining regulations, with inspections of mining lands dropping from 184 in 2021 to just 57 in 2023. Similarly, investigations of complaints have plummeted from 835 in 2021 to only 204 in 2023.

According to the GSMB, staffing shortages have significantly hindered efforts to combat illegal mining and its harmful environmental impact, raising concerns about the effectiveness of current enforcement measures.

GSMB response 

In light of ongoing concerns, The Sunday Morning reached out to the GSMB for clarification on its operations. 

GSMB Director – Environmental Impact Assessments and Regions Eng. Asela Fernando explained that the bureau conducted post-monitoring of all licences it issued. “We monitor the progress every month. We also conduct raids in relation to complaints with the support of the Police,” he said.  

When asked about the licensing process, Eng. Fernando elaborated on the multiple layers of approval involved in certain licence categories. 

“For some licence categories, several approvals are needed from various State institutions before receiving the licence from the GSMB. These institutions check if the mining operations are being conducted in an environmentally friendly manner; otherwise, their licences will be cancelled,” he explained. 

He also highlighted that the issue primarily lay with illegal mining sites. “The issue is with illegally operating sites, but the GSMB conducts random raids,” he stressed.  

Meanwhile, GSMB Senior Director – Mines Eng. D. Sajjana De Silva pointed out a significant drop in the bureau’s annual revenue due to a nationwide slowdown in development activities. “All expressway constructions are now on hold and almost all quarries have been closed down, so the GSMB’s main income has been reduced,” De Silva said.  

He further explained that the GSMB had previously partnered with the Special Task Force (STF) to carry out raids against illegal mining operations. 

“We had a team deployed from the STF and we conducted raids collaboratively for several years since 2015. But now that team has been withdrawn. The team did a really good job addressing illegal mining, raiding those areas, and taking legal action against those involved in such activities,” De Silva added.