MINISTER of Finance and the Public Service Dr Nigel Clarke says that the Government may have to take legal action to get bauxite/alumina companies to resume paying the bauxite levy, as the COVID-19 crisis subsides.

“You know the history of the industry as well as I do,” Dr Clarke responded to a call from Opposition spokesman on mining and energy, Phillip Paulwell, to have a relook at the Capital Development Fund (CDF) which is financed by the 47-year-old Bauxite Production Levy.

“Over the past 10 years we have gone through various periods of serious dislocation which resulted in long periods of either waivers of the levy or agreements to reduce the levy,” the minister continued.

He said that it was “unfortunate” that variance over several years, due primarily to low prices, “had introduced some patterns that are going to be hard to break but, break we must”.

He said that he shared with Transport and Mining Minister Robert Montague, who confirmed during the 2020/21 Sectoral Debate in the House of Representatives in June last year, that no payments were made to the fund under the Bauxite (Production Levy) Act for the whole year.

“The minister has been very clear on his position as far as that is concerned and it is a position that I support, and we will be working to make sure that what you have outlined is what is achieved. But it won’t be easy, and we may have to resort to legal action, if necessary” Clarke stated.

The issue came up after the finance minister pointed out to the House of Representatives that the full amount of $244 million, which he was seeking from the CDF, was needed to finance the work of the Jamaica Bauxite Institute (JBI), which was established by the Government in 1975 to monitor and study the aluminum industry and provide technical advice and personnel to negotiate the various agreements.

Clarke noted that the primary activities of the JBI are not revenue-generating, and over time it has become the practice that the CDF would be the main source of funding for the institute.

He said that over the years, the JBI has expanded its operation to include the provision of laboratory services on a commercial basis. However, the $25.5 million in revenues generated by the service was insufficient to finance the JBI’s $285-million bill, which has led to the need for the $244 million required from the CDF.

He said the JBI had been granted approximately $1.1 billion by the CDF between 2016/17 and 2020/21, as the necessary funding climbed from $211 million in 2016/17 to $244 in 2020/21.

The balance in the CDF as at May 31 this year had fallen to $1.6 billion, which would be just enough to support the JBI and which the Government was committed to as it would continue to withdraw from the CDF to support the JBI.

Opposition spokesman on finance Julian Robinson was concerned with where the money would come from to support the redevelopment of the mined-out areas which were promised funding for reclamation, with the JBI “eating up all the funds left in the CDF”.

Dr Clarke said that with respect to support for the affected communities in the mining areas, the Government would seek to achieve those goals through central government budgeting while the CDF continues to finance the JBI.

He said that the $1.7 billion which had been available prior to the withdrawal was one of the lowest of deposit levels for the CDF, under the financing arrangement.

“We are talking about seven years of funding so we don’t want to use it for any other purpose,” the minister insisted.

“The point about the communities that are affected by bauxite mining and the recourse through social and other investments in those areas are well taken, but it is through the main organs of Government that we hope to achieve some kind of fidelity to that principle,” Clarke noted.

Paulwell said he wanted to hear more about how the mined-out areas would survive, in the meantime. He called for a relook at the CDF, and suggested that the Government engage the communities and their stakeholders in discussions about the future operation of the CDF.

“During the last number of years we have seen the industry going through a difficult period, and I think that we need to spend some time to recalibrate to see how we can, in a reasonable way, ensure that those who are involved with the industry pay what is due,” Paulwell said.

He suggested that the levy should be paid “as soon as you dig the soil, even before you do your processing”.

“There has to be some reforms where that is concerned, and I think that we have to go back to insisting that for all the operators, whether jointly owned with Government or operate on your own as private sector, that the bauxite levy be applicable, and that we don’t vary again from imposing a strict Bauxite Levy regime,” Paulwell said.

“My own recommendation is that we apply strictly the provisions regarding the Bauxite Levy, and it should not be varied but be applicable to all the players in the industry, as we are emerging now out of the (COVID-19) crisis,” he added.

The Bauxite Levy was first introduced under the Michael Manley Administration in 1974 on bauxite and laterite mined in Jamaica. However, during the budget debate in 2020, the Mining Minister Robert Montague confirmed that no payments were made to the fund under the Bauxite (Production Levy) Act. This happened after some concessions were given to some companies affected by low alumina prices on the world market.

Montague said that the only company required to pay the levy at that time was West Indies Alumina Company (WINDALCO), in St Catherine, a joint venture between the Russia’s UC Rusal and the Government of Jamaica, which was not meeting its commitments, either.

He promised that more would be done during the rest of the fiscal year to ensure that the companies resume paying the levy.