Miners? riches will soon have to be shared with the people affected by their activity. The Cabinet on Friday gave its approval to a Bill which proposes to make it mandatory for mining companies to compensate the local population impacted by mining operations. The Bill will be introduced in Parliament in the winter session.
In the case of non-coal minerals, the firms will have to earmark an amount equivalent to the royalty they pay to the government for the well-being of local people. Coal companies, on their part, will have to share their profit with the locals ? 26% of profit-after-tax.
Once the Bill becomes law, all mining companies will feel the pinch ? Coal India, SAIL, Tata Steel, JSW, Sesa Goa, NMDC, Essar Steel, Hindustan Zinc, Hindustan Copper, Essel mining to name a few.
Non-coal miners paid Rs 4,450 crore as royalty last year. An equivalent amount will now be earmarked for local area development for the benefit of the people in the mineral-rich regions.
The impact on coal miners could have been much bigger had they been asked to earmark an amount equivalent to the royalty they pay to the government to the affected population as is the case with other mining firms. Coal India?s royalty payments last fiscal were around Rs 5,200 crore. The consolidated profit after tax of CIL and its subsidiaries was about Rs 11,000 crore last year. So, if royalty was the criterion for sharing the riches with the local people, CIL?s burden would have doubled. Royalty on coal is worked out as per a hybrid formula that involves ad valorem and fixed impost components. It works out to 12-13% of the sale value of the mineral. In West Bengal, under a mechanism upheld by the Supreme Court, coal mining attracts certain cesses, instead of royalty.
The new law would be applied to captive mining projects as well. Besides, it has a provision for companies to buy out each others? mines without taking stake in the companies.
According to mines minister Dinsha Patel, the funds provided by miners would be made available to local administration for creating infrastructure such as schools, road, drinking water facilities for people living close to mining areas.
The Mines and Minerals Development & Regulation Bill was earlier supposed to be tabled during the monsoon session, as a ministerial panel headed by finance minister Pranab Mukherjee had approved it in July. The new MMDR bill, seeks to replace a 1957 act under the same name.
The new Bill as provision of Mineral Development Fund which would be created in every district, in which profit and royalty shared by miners will be deposited and spent on the local population and area development, mines secretary S Vijay Kumar said.
Besides the compensating mining project-affected people through profit-sharing and royalty, the new bill also obligates mining firms to pay a 10% cess to state governments and 2.5% to the Centre on the total royalty paid. It also has punitive provisions to prevent illegal mining and is significant especially at a time when the mining sector in country is facing mining mess in states like Karnataka and Goa.
?The cess to the state government would help setting up special courts at the local level to deal with illegal mining,? Kumar noted.
After the Cabinet approval, the Bill will be tabled in the Parliament in the winter session.
Private miners including Sesa Goa, Essar have been opposing the increase in royalty saying that it would make India one of the highly taxed places for mining across the world. Industry bodies such as Ficci and Assocham too raised concerns over the increase in taxes.
In another decision, the Cabinet on Friday approved payment of 78 days? wage to non-gazetted apprentices of railways for 2010-11. This is the highest ever performance bonus given by railways during the festive season. Last year, it had paid 77 days? wage as bonus.
While the news has been cheered by railway employees, it is expected to further deteriorate the financial position of the transporter. The payment of bonus would put a financial burden of R1,098.58 crore.