The Royal Audit Authority (RAA) has highlighted several critical areas requiring urgent attention by the State Mining Corporation Limited (SMCL) to enhance its alignment with national strategic objectives and its internal strategic planning framework. Despite SMCL’s role as a designated body for developing Bhutan’s strategic minerals, the company faces significant challenges in strategy development, operational execution, and performance measurement.
Lack of Strategic Mineral Development Framework
Although SMCL is tasked with developing strategic minerals, its efforts have been confined to coal, quartzite, gypsum, and dolomite. According to the RAA, the absence of a definitive list of strategic minerals, mandated under the Mineral Development Policy 2017, is a major constraint. The erstwhile Ministry of Economic Affairs did not classify strategic minerals, leaving SMCL without the necessary regulatory clarity to pursue broader initiatives.
SMCL and the Department of Geology and Mines (DGM) have pointed out that defining strategic minerals requires extensive studies, including market dynamics and techno-economic feasibility. Bhutan’s unexplored mineral potential further complicates this process. “While the Mines and Minerals Bill 2020 aims to address these gaps, its delayed passage in parliament continues to hinder progress,” the RAA’s report states.
Gaps in Strategic Plan Integration
The RAA found significant inconsistencies in SMCL’s integration of its Corporate Strategic Plan (CSP) with its Articles of Incorporation (AoI).
While SMCL’s AoI mandates the adoption of environmentally responsive and socially acceptable practices, these objectives are not adequately reflected in its CSP. Further, although SMCL emphasizes sustainable mining in its CSP, specific strategies to achieve this remain undefined.
Operational and Performance Management Concerns
SMCL’s lack of a detailed operational plan was noted as a key barrier to achieving its strategic goals. The CSP’s implementation through the Annual Performance Compact (APC) has been inconsistent, with revenue targets in the APC not aligning with those in the CSP.
Moreover, performance monitoring has been limited. While the APC has sufficed for basic evaluations, critical aspects such as customer satisfaction, market share, and service delivery remain unassessed. SMCL acknowledged that it’s Corporate Planning and Monitoring Section, responsible for overseeing these evaluations, was non-operational to minimize costs. However, the section is set to resume operations in February 2024.
In the meantime, the RAA recommended the urgent need for regulatory guidance to define strategic minerals. It also called on SMCL to align CSP and APC to ensure consistency between strategic plans and performance compacts to establish a robust performance management framework.
The Authority also alerted SMCL to enhance sustainability focus by incorporating clear strategies for environmental sustainability and social responsibility into its CSP, while strengthening, monitoring, evaluating, and resuming full-scale monitoring to track progress across all strategic areas, not just financial performance.
Though SMCL has made strides in operationalizing its CSP, systemic challenges in regulatory clarity and internal alignment persists as mentioned by RAA. “With the resumption of its monitoring section and potential legislative updates, SMCL has an opportunity to strengthen its strategic framework and position itself as a responsible leader in Bhutan’s mining sector. However, the timely implementation of these measures remains crucial to realizing its long-term vision,” the RAA advised.
Meanwhile, to achieve its mandates, SMCL has developed Corporate Strategic Plan 2019-23 and 2022-31 that provide strategic road map for its overall operation. Likewise, its Annual Compact also provides detailed targets for financial and non-financial performances for different segments of minerals under its operation. The overall performance of SMCL is assessed from the financial, social, environmental and human resource perspectives.
By Tashi Namgyal From Thimphu
