Composition and Functions of the DMF is prescribed by the State Governments taking guidelines from article 244 of Indian Constitution, fifth and sixth schedules, Provisions of the Panchayats (Extension to the Scheduled Areas) Act, 1996 and the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006. Funds every mining lease holder of will pay a fraction of royalty, not exceeding one-third of the royalty, to the DMF as per rates prescribed by Central Government. This fund will be used for welfare of the people affected in the mining affected areas.
The Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) will be implemented by the DMFs of the respective districts using the funds accruing to the DMF. The overall objective of PMKKKY scheme will be (a) to implement various developmental and welfare projects/programs in mining affected areas, and these projects/ programs will be complementing the existing ongoing schemes/projects of State and Central Government; (b) to minimize/mitigate the adverse impacts, during and after mining, on the environment, health and socio-economics of people in mining districts; and (c) to ensure long-term sustainable livelihoods for the affected people in mining areas.