The existing miners will have to pay 30% of the royalty as contribution towards the proposed district mineral foundations (DMFs), which is meant to support project-affected people, while those who would get mines through the auction route now would have to pay just 10% of royalty, mines secretary Balvinder Kumar told FE. The Centre would notify the rates soon, enabling the states to start the auction process for the four notified minerals — iron ore, bauxite, limestone and manganese ore.
The Minerals (Development and Regulation) Act, last amended in March, made auction mandatory for allocation of mines. It stipulated that existing miners must pay “up to 100%” of the royalty on the mineral as their contribution towards the DMF, while new allocatees will shell out “up to a third of the royalty” to boost the respective DMFs.
FE had earlier reported, quoting steel and mines minsiter Narnedra Singh Tomar, that the actual DMF contributions would be far less but the industry was keen to know the exact figures, given that a higher tax burden could potentially upset their investment plans. Though mining is a state subject, the Centre has the discretion to decide DMF contributions.
“High rate of royalties” on many minerals have already been seen to be an onus by many leading companies. The royalty on iron ore was raised to 15% from 10% in August last year.
The mining industry feels that the DMF rates should be kept at 10% of royalty for for both the new and existing mines, given that its tax burden is already higher than counterparts in the rest of the world. “More taxes would mean that the price of end product would be higher as a result of which consumers would suffer. Since royalty is charged on revenue, a small increase (in the rate) would have a significant impact on the profitability of a company compared to corporate tax, which is charged on earnings,” industry body FIMI”s President H Noor Ahmed said.
Although no official estimate is immediately available on the annual DMF outgo for existing miners of the four notified minerals, sources said that if the 30% rate is applied, it could be around Rs 3,000 crore. Earlier, the public-sector Steel Authority of India had estimated 100% of royalty as DMF contribution would have made it poorer by Rs 1,700 crore.
Mineral-rich states have, however, been demanding the DMF contributions be kept at higher levels for the benefit of the people-affected people. The Centre took nearly five months from the date of notification of the Act to fix the rate as it was caught between the pleas of the mining industry and the states.