India's Comptroller and Auditor General (CAG) has found that more than ₹22,500 crore collected by mining welfare bodies in the eastern state of Odisha was diverted away from its intended purpose, funding stadiums and road construction instead of programmes meant to help communities displaced or harmed by mining operations.

The audit examined six District Mineral Foundations (DMFs) in Odisha, a mineral-rich state that accounts for a significant share of India's iron ore, coal, chromite, and bauxite production. DMFs are statutory trusts set up under Indian law specifically to channel a portion of mining royalties toward the welfare of people living in and around mining areas, populations that often bear the environmental and social costs of extraction, including displacement, water contamination, and loss of agricultural land.

Instead, the CAG report found, funds intended for these communities were routed into general infrastructure projects with little direct connection to mining-affected populations. Stadiums and road networks, the report noted, were among the projects funded using DMF money, raising fresh questions about how India's states are managing resource revenues meant to compensate the communities that host mining operations.

A Mandate Left Unfulfilled

Compounding the concern, auditors found that none of the six DMFs examined had established an Endowment Fund, a mechanism required under the governing regulations to ensure long-term financial sustainability for welfare programmes even after mining activity in a given area slows or ends.

The absence of these endowment funds across every DMF audited suggests a systemic failure rather than an isolated lapse. Endowment funds are designed to act as a financial cushion, generating returns that can be used to sustain welfare initiatives such as healthcare, education, and livelihood support well into the future. Without them, the long-term financial security of mining-affected communities remains uncertain, dependent instead on the continued flow of royalties tied to active extraction.

Why District Mineral Foundations Exist

DMFs were established nationally as part of reforms to India's mining sector, requiring companies to contribute a percentage of royalty payments to trusts governed at the district level. The underlying principle was straightforward: communities that live with the environmental and social disruption of mining, often some of the poorest and most marginalized in the country, should see direct benefit from the wealth extracted from their land.

Odisha, home to extensive mineral belts in districts such as Keonjhar, Sundargarh, and Jharsuguda, has been a major beneficiary of DMF collections given the scale of its mining industry. The ₹22,500 crore figure identified by the CAG represents a substantial pool of public resources, one that, if properly directed, could have funded significant improvements in health infrastructure, clean water access, education, and skill development in mining-affected districts.

Despite the six audited DMFs collecting more than ₹22,500 crore, none had established an Endowment Fund, the report found.

Accountability Concerns

The findings add to a broader pattern of scrutiny over how India's states manage earmarked welfare funds, and they raise pointed questions about oversight mechanisms meant to ensure that mining royalties reach their intended beneficiaries. When funds designated for vulnerable, mining-affected populations are instead used for general public infrastructure, projects that may benefit wider populations but do not specifically address the harms of mining, it undermines the core rationale for the DMF system.

Critics of such diversions argue that stadiums and roads, while not inherently objectionable as public goods, represent a departure from the targeted welfare mission the funds were designed to serve. Mining-affected communities frequently contend with contaminated water sources, respiratory illnesses linked to dust and pollution, and the loss of traditional livelihoods tied to land and forests. Advocates for these communities have long argued that DMF money should prioritize direct interventions such as healthcare facilities, safe drinking water systems, and vocational training rather than broader infrastructure that could be funded through other government channels.

The CAG's findings are likely to intensify calls for stricter enforcement of DMF spending guidelines and more rigorous state-level oversight of how mining royalty funds are allocated. With India's mining sector continuing to expand to meet industrial and export demand, the question of whether affected communities are receiving their promised share of the benefits remains a pressing concern for policymakers and civil society groups alike.