In the midst of debate over development vis-a-vis environment protection, Finance Minister Pranab Mukherjee today said the solution does not lie in stopping mining projects but in properly compensating people who are displaced.

"Answer does not lie in the companies stopping mining activities. Answer lies in providing alternatives to those displaced... in what form we can compensate them and make them beneficiary of economic development," Finance Minister Pranab Mukherjee told a Coal Summit here.

Mukherjee's comments came within a month of Environment Ministry rejecting earlier clearances to Vedanta's Rs 7,000 crore bauxite mining project in Orissa citing violation of green and tribal norms.

The ministry has also halted land acquisition process for Posco's Rs 54,000 crore steel project in the state citing similar violations.

Vedanta group was in pact with Orissa Mining Corporation since past six years to mine bauxite from state's Niymagiri hills, which is abode of Dongria Kondh tribe, to feed its aluminium project in the state.

Congress general secretary Rahul Gandhi has also backed the tribal?s cause in Orissa?s Niyamgiri hills.

Currently, a Group of Ministers (GoM), headed by Mukherjee himself, is considering a new mining legislation which, among other things, proposes that companies share 26 per cent of their profit from mining with those displaced.

"That (the issue of compensating those displaced) is the challenge and we are addressing that issue," the Finance Minister said.

The profit sharing proposal has been questioned by the industry on the ground that 26 per cent rate is too high and was not practical.

The GoM will meet soon to clear the final draft of the Bill.

About Rs 1.5 lakh crore worth of greenfield steel projects of ArcelorMittal and Posco have been delayed for about 5 years due to tribal protests against land acquisition in Orissa and Jharkhand.