Trying their best to avoid fixation of iron-ore royalty on ad-valorem basis, the Federation of Indian Mineral Industries (Fimi) has proposed to continue with royalty on tonnage basis with a hike of 100% of the present rate.
Royalty rates currently range between Rs 16-27 per tonne depending on the grade of iron-ore.
Fimi, in its presentation before a study group chaired by the special secretary at the mines ministry, said fixation of royalty on ad-valorem would be difficult as iron-ore prices vary in different mines and for different grades of ore.
The government, keeping in view that ore was increasingly getting costlier, had set up the study group recently to suggest changes in the royalty structure. The Hoda Committee on mining sector reforms had also recommended that the rates of royalty should move decisively towards ad-valorem basis.
However, members from iron ore producing states such as Orissa, Karnataka, Rajasthan, Jharkhand and Chhattisgarh demanded royalty to be fixed on ad-valorem basis. ?Royalty that the states currently get is very less. There is a need to revise it,? the members said.
According to ad-valorem, royalty would be charged as a fixed percentage on the selling price of ore. Iron ore prices in the spot market are trading at $115 (about Rs 4,600) per tonne minus freight rates.
The federation said that iron ore miners have to bear high cost of transportation and handling charges for moving the raw material, averaging around Rs 1,500 per tonne, which leaves them with insufficient margins for viable mining operations.
The study group, which sought the data on the cost of extraction and transportation, handling charges, FOB prices and domestic market prices of iron ore for 2004-05 to 2006-07, is entrusted to suggest ways to change the structure of royalties.