Existing miners of minerals including coal will be hit by the payment they must make to the district mineral foundation (DMF) at 100% of the royalty paid by them to the state governments following the passage of the MMDR Bill on Friday. While a ceiling of 100% has been specified for mines allotted prior to the amendments to the MMDR Act, state governments are expected to recover the full amount. Once the leases expire and are the mines re-auctioned, the amount will be 33% of the royalty payable.
Given that all current operating mines of Tata Steel, SAIL, Hindalco and Sesa Sterlite were granted before the MMDR Act was amended, the 100% ceiling will apply to them.
Ravi Uppal, MD and CEO, Jindal Steel & Power (JSPL), told FE the effective royalty burden on companies would go up account of the contributions to be made to the DMF. “This will have implications for value-added players like ourselves as costs will now rise,” Uppal said, adding he expected greater resource security as a result of the passage of the Bill. “Vast amounts of natural resources lying underutilised owing to the want of approvals and clearances can now be tapped into,” Uppal said.
Miners have already been hit by the hike in royalty rates across minerals in August last year, including those on iron ore. Corporates agree that the continuation of existing mining leases till March 2020 for non-captive use and March 2030 for captive purposes is a positive development.
The passage of the MMDR Bill, however, will prevent policy logjam relating to the auctioning of mines and provide clarity the life of mines and the renewal of existing leases.
A JPMorgan report noted that post the MMDR law, the effective levy in terms of royalty and DMF contribution would vary in the 20-30% range.
“While this is very high, importantly it should reduce local opposition on the ground in the key states of Jharkhand, Odisha, Chhattisgarh and MP which have a large reserve base across minerals. Post the coal block auctions, where there is significant money flow to the states, the increase in DMF would also bring the cash inflow from other minerals closer to coal,” the report said.