Lowering district mineral fund contributions an astute move
The government has shown astuteness by lowering the district mineral fund (DMF) levy for miners. Though the Centre had spoken of how states would get R2 lakh crore in royalties over three decades, thanks to the amended Mines and Minerals Development Rights (MMDR) Act, it was always clear that new royalty norms were more likely to scuttle mining development rather than promote it. Over and above the royalties paid to the Centre, existing miners had to shell out upto 100% of the royalties as contribution to the DMF, while new players had to contribute 33%. Given mineral prices are at multi-year lows, such high pay-outs would have made Indian ores uncompetitive. More so, with royalty rates already very high compared to other nations—for iron ore, India’s royalty rate is 15% (plus another 15% for existing miners) as compared to Australia’s 6.5-7.5% and Brazil’s 2%. Therefore, the government bringing down the DMF levy to 30% for existing miners and 10% for new players is good news.
Though mineral-rich states had demanded that DMF contributions be capped at higher levels, capping them even lower than the new rates would be in their best interests. With global demand slowing down, attracting investment in mining would depend on lower imposts. After all, if a state’s policy is lucrative for miners, even with lower rates, there would be a significant increase in revenue.