Miners may not have to pay 100% of royalty as foundation contribution

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New Delhi | Published: July 24, 2015 12:46:54 AM

Mining companies may not have to shell out amounts equivalent to the royalty they pay to the state governments as contribution towards the district mineral foundations...

Mining companies may not have to shell out amounts equivalent to the royalty they pay to the state governments as contribution towards the district mineral foundations (DMF). Although the Mines and Minerals (Development and Regulation Act, as amended recently, empowers the Centre to mandate DMF contribution up to 100% of royalty, it would ask for only a smaller contribution to begin with, steel and mines minister Narendra Singh Tomar told FE.

Though mining is a state subject, the Centre has the discretion to decide the exact quantum of payment towards DMF. The Act mandates existing miners of iron ore, bauxite, limestone and manganese ore to pay up to 100% of the royalty on the mineral as their contribution towards the DMF. Miners which would get fresh mining lease (through the auction route) would have to pay a maximum of 33% of the royalty towards DMF, meant to support the project-affected people.

Citing example of state-run Steel Authority of India, which would need to fork out a whopping R1,700 crore per annum towards DMF, given its current level of production if the new norms are applied, Tomar said such levies could make many existing mines unviable. “It would be lower than (100% of royalty),” he said.

Caught between the plea of the mining industry, already reeling under heavy a tax burden, to keep the contribution towards DMF to the minimum level possible and the states’ demand to keep it at the maximum level, the steel and mines ministry failed to fix the rate even as the Act was notified over four months ago.

Though the failure to fix the rate may not come in the way of mining auction starting, it has certainly created a sense of uncertainty among existing and prospective miners.

While the mines ministry intends to give more to the project-affected people, at the same time, it does not intend to put an excessive burden on miners and create a situation where mining becomes more strenuous. Sources said following consultations with the states and miners, the mines minister has appraised Prime Minister Narendra Modi of the situation and the final call is likely to be taken by the Prime Minister’s Office soon.

Revisable every three years, the royalty on iron ore was raised to 15% from 10% in August last year. With the higher royalty — the new DMF impost of 2% National Mineral Exploration Trust levy — the burden on miners will only rise.

Miners’ relief
* Mining companies may not have to shell out amounts equivalent to the royalty they pay to the state governments as contribution towards the district mineral foundations (DMF)
* Although the Mines and Minerals (Development and Regulation Act, as amended recently, empowers the Centre to mandate DMF contribution up to 100% of royalty, it would ask for only a smaller contribution to begin with
* Citing example of Steel Authority of India, which would need to fork out R1,700 crore per annum towards DMF, given its current level of production if the new norms are applied, the mines minister said such levies could make many existing mines unviable

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