The mineral-rich states may soon start to get more revenues in the way of royalty from minerals. The ministry of mines has constituted a study group headed by special secretary Pradeep Kumar to review the royalty rates. Also, royalty is likely to be linked to ad-valorem basis instead of quantity based now.
?There is a lot of pressure on us to revise the rate of royalty and link it to ad valorem basis. But as per the MMDR Act, 1957, any upward revision is permissible after a gap of 3 years. The last revision was made in October 2004 and next upward revision can only take place in October 2007?, said mines minister Sis Ram Ola.
Also, the mines ministry is likely to do away with the present system and bring in ad valorem based royalty system. ?Internationally royalty is calculated on ad valorem basis. We want to bring the same practice in India too?, official source added.
All the mineral-rich states have been demanding linking of royalty to ad valorem system as it is likely to give them more revenues. Even the Hoda committee has recommended to do the same.
The ministry is also likely to go for a benchmark rate of 7.5% as prevalent in Western Australia . Though, in many other countries royalty rates are much higher, even a 7.5% rate is likely to increase significantly the coffer of mineral- rich states by 3 to 4 times. Further, the government may also revise dead rent. Dead rent is levied on area included in mining lease from which minerals are not extracted.
At present, India follows quantity based royalty also know as specific rate royalty and it is charged on rupees per tonne.
The present system is easy to administer but inefficient as collection of royalty revenue is a function of quantity extracted and rising prices do not get reflected in it. In India, royalty on iron?ore is between Rs 4 to Rs 27 per tonne depending upon the various grades.
In ad valorem based system royalty is calculated by applying a percentage value to gross sales value.