Let companies engaged in coal mining for captive use earmark an amount equal to a fraction of the royalty they pay the states for the benefit of affected communities in the mining areas, instead of 26% of post-tax profits as suggested earlier, the coal ministry has said.
It is practically difficult to separate the profits from captive coal mining for steel, cement and power companies, the ministry told the finance ministry.
The Mines and Minerals Development Regulation Bill which included the provisions for mobilising resources from mining firms for local area development and for the welfare of the population affected by mining, was tabled in Parliament on Monday.
As for coal companies which does commercial coal mining (Coal India and its subsidiaries), the 26% profit sharing clause will remain. In the case of these companies, an extra payout equivalent to 100% of royalty, like in the case of firms in non-coal mining, could turn out to be a bigger burden than profit sharing, going by historical data.
For captive coal mining, what is being proposed now is a charge that is a fraction of the royalty.
Coal India registered a post-tax profit of about Rs 11,000 crore last fiscal and the royalty payments by the firm (including all its subsidiaries) was around Rs 5,500 crore. So, 26% of profit would have been a lesser burden on the firm that having to pay an additional amount equivalent to the total royalty sum.
The coal ministry plans to make the proposal to the Standing Committee when it begins its discussions on the Bill.
“There is problem in calculating profit of captive coal blocks as their owners (steel, power and cement companies) do not maintain separate accounts for their mining activities. A royalty based charge would make the process transparent and prevent companies to escape the benefit-sharing objective of the new legislation,” said a government official privy to the development.
The MMDR Bill will replace the over half-a-century old Mining Act, 1957 and is expected to bring in more private companies in exploration and mining areas.
Private coal companies had also objected the 26% profit sharing formula saying it would make a huge dent in their profits and make Indian mining one of the costliest in the world.
The draft Bill also seeks to establish a National Mining Regulatory Authority which would constitute a chairperson and not more than nine members to advise the government on rates of royalty, dead rent, benefit sharing with district mineral foundation.
The coal ministry has raised an objection to this
as well. It has told the
finance ministry that since it already has a plan to set up a separate regulator for coal sector, the MMDR Bill’s provision in this regard should not be applicable to the coal industry.