Coal and lignite will cost more as the Cabinet Committee on Economic Affairs (CCEA) has approved a proposal to charge royalty on ad-valorem basis or based on the market value of the mineral. Coal will now attract a royalty of 14% and lignite will be charged at 6% of the basic price of the commodity instead of present mixed royalty structure comprising both ad-valorem and specific duty component.

As a result of this revision, the coal producing states will earn R6,980 crore as coal royalty over the present earnings of R5,950 crore. However, the revision will raise the price of domestic coal by about 5%, thereby impacting power sector companies who would be forced to pass this increase to electricity consumers.

At present, royalty for both minerals is calculated through a formula consisting of ad-valorem and a fixed component. The latter depends on the grade of coal and varies between R45-R180 per tonne, while the ad-valorem is calculated at 5% of the basic pit-head price of coal.

?My understanding is that incremental impact of royalty revision on price of coal would be between 1%-2% depending on the grade of coal,? said E&Y leader mining and metals Anjani K Agarwal said.

As per the Cabinet decision, the proposed royalty revision will not to be extended to West Bengal, unless the cesses imposed by the state government are withdrawn. The state did not get benefit of royalty revision even in the past over the same issue.

For states other than West Bengal that levy cesses or other taxes specific to coal-bearing lands, the revision of royalty allowed shall be adjusted for the local cesses or such taxes to limit the overall revenue to the ad-valorem royalty yield, a statement said.

For the purpose of calculating the royalty for captive coal mines, the price of coal produced from captive coal mines will mean the basic pithead price of run of mine (ROM) coal and lignite, as reflected in the invoices, excluding taxes, levies and other charges of Coal India limited (CIL).

The proposal to shift to the new regime will be applicable for both state-owned and private sector miners, including captive coal producers.

The royalty revenue earning of mineral-rich states will increase up to 17.31% for coal and 14.53% for lignite. These include Orissa, Jharkhand, Chhattisgarh, Andhra Pradesh, Tamil Nadu and Madhya Pradesh.

NLC plan to set up R10k-cr plant gets nod

Lucknow: In an indication of the new-found bonhomie between the new Samajwadi Party government in Uttar Pradesh and the Congress-led UPA at the Centre, the CCEA also approved the State-owned Neyveli Lignite Corporation?s (NLC) proposed joint venture to set up a R10,000-crore thermal power project in UP. The Cabinet has given its approval to NLC for the JV to set up a 1,980 MW coal-based thermal power project at Ghatmapur in Kanpur district of the state.