National Mineral Development Corporation, Sesa Goa, Essar Mining and Hindalco, among others, are up in arms against the government proposal to jack up the royalty rates on minerals by 100%. The companies say any further increase in royalty rates would lead to not only a loss in revenue to the state governments but also the employment of thousands of workers. The move is also going to adversely impact companies who do not own their own mines but are dependent on purchasing iron ore and coal from abroad.
The Confederation of Indian Industries (CII) has shot off a detailed note to the mines ministry in this regard, stating that the move would have a negative impact on international business, especially with countries like South Korea, Japan, and others from the Asean region, which have much lower duty rates.
?The per metric tonne increase in royalty would significantly increase the cost of mining. In these times when the demand scenario is not very encouraging, the royalty structure may push up steel prices and increase the cost of production,? the CII letter to the special secretary in the mines ministry said.
At present, the royalty paid by Indian miners to the government is 10%, which is considered to be the highest globally as compared to rates charged by governments in China, Brazil and South Africa, in a range of 2%-3%. Any increase in royalty would significantly increase the cost of mining and would further push up steel prices.
The rates of royalty on minerals are fixed by the government and come up for revision every three-year period. The royalty is paid to the state government for minerals extracted. Over the last few years, there has been a decline in production and export of iron ore. The production has come down from 219 million tonne (MT) in 2010 to 170 MT in 2012, and exports have fallen from 117 MT during 2010 to 62 MT in 2012.