Mineral-rich states such as Chhattisgarh, Jharkhand and Odisha are likely to mop up higher royalty receipts from the next fiscal, with the Centre considering a revision in the royalty rates.
Mineral-rich states such as Chhattisgarh, Jharkhand and Odisha are likely to mop up higher royalty receipts from the next fiscal, with the Centre considering a revision in the royalty rates. Royalty rates were last revised in September 2014, and the increase was in the range of 10-15% across minerals such as iron ore, bauxite, diamond and gold. Royalties, uniformly applicable for all states, are levied as percentage of the value of the mineral extracted for most minerals, while for others, it is fixed on a tonnage basis. The mines ministry has already formed a 24-member study group, headed by its additional secretary, to review the rates of royalty and recommend a revision in the rates. The group’s first meeting is scheduled for March 13. The panel will submit its report in six months after a series of deliberations. Revenues on account of royalty are fixed by the Centre for major minerals such as iron ore and bauxite (other than coal, lignite and others), and are collected by the state governments. In case of minor minerals, the state has powers to both fix and collect royalty, fees, fines or other relevant charges. Though royalty accruals for recent years are not available, states collected Rs 10,704 crore on this impost in 2014-15, compared with Rs 9,594 crore a year earlier.
As per the available numbers, Odisha earned the highest in 2016-17 at Rs 2,477 crore, followed by Chhattisgarh’s Rs 1,115 crore and Rs 1,015 crore by Karnataka. An upward revision in the royalty rate would mean higher accrual of funds under the district mineral foundation (DMF), primarily used for uplifting lives of the people affected by the project. At the same time, it would deal a blow to mine owners since royalty rates are among the highest in India. Leaseholders who got leases allocated through the auction route pay 10% of the royalty to the DMF while those who got the mines through the earlier dispensation route pay 30% of the royalty to the DMF fund. In 2016-17, around Rs 7,150 crore was collected under the DMF, according to mines ministry. A section of miners said an upward revision in the royalty rates would mean that the price of the 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.