Coal news and updates

India raises royalty rate on iron ore by 5%, coal spared

August 21: The Indian government has raised the royalty rate on iron ore and chromite to 15% from 10% and that on manganese ore to 5% from 4.2%, both ad-valorem, but avoided any revision in the royalty rate on major minerals like coal and lignite.

The royalty rate on bauxite was also raised marginally to 0.6% from 0.5%, ad-valorem.

A decision to revise the royalty on 33 minerals was taken by the Cabinet Committee on Economic Affairs (CCEA) on August 20 in line with the government’s Budget announcement on enhancing the royalty on minerals and to boost the income of states in which these are produced.

"The Cabinet in-principle approved revision of the mineral royalty. This (revision) excludes coal, lignite and sand for stowing," Communications and Information Technology Minister Ravi Shankar Prasad said after a Cabinet meeting.

The royalty on coal and lignite was last revised to 14% and 6% ad-valorem in May, 2012 and that on other minerals in 2009.

Under the Mines and Minerals (Development and Regulation) Act, 1957, the central government, by notification in the Official Gazette, revises the rate at which royalty is payable in respect of any mineral. This cannot be done more than once every three years. There are 51 minerals prescribed in the Second Schedule of the Act, the rates varying from mineral to mineral.

This should lead to an increase in input prices for all mineral-based industries. It should also substantially boost state governments’ revenues. By unofficial estimates, the annual revenue collection of mineral-bearing states could swell about 40% or more than Rs 3,000 crore with major beneficiary being Chhattisgarh (about Rs 630 crore), Odisha (Rs 1,630 crore), Jharkhand (Rs 300 crore), Karnataka and Goa, which are among the 11 mineral-rich states.

The current proposals are based on recommendations of a 17-member panel set up by the previous government, led by the Congress, in 2011.

Royalty is a tax levied by government on mining entities, in lieu of transfer of ownership rights of mines. The earlier revision, in 2009, happened when the government shifted to an ad valorem (percentage) basis of charging royalty.