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States to be richer by Rs 11,000 cr as Centre plans hike in mineral royalties

The NDA government is seeing the hike in royalty rates as being crucial to Centre-State relations.

Written by Priyadarshi Siddhanta | New Delhi | Updated: June 18, 2014 11:51:13 am


In a major concession to the mineral-rich states, the NDA government has planned to nearly double the royalty rates of at least 10 minerals, which is likely to enrich their coffers by over Rs 11,000 crore.

Mineral-rich states like Orissa, Chhattisgarh and Jharkhand have been demanding substantial hike in the royalty rates of major minerals including iron ore .

The erstwhile UPA government had agreed to, but the process got stuck.

The Narendra Modi government is learnt to have finalised a blueprint which prescribes upping the royalty rates of minerals including bauxite, chrome and manganese ore besides iron ore.

A senior mines ministry official said after inputs from concerned ministries, the blueprint would be put up to the Cabinet Committee on Economic Affairs for its approval, possibly by the end of this month.

The UPA government had set up a committee in 2011 to examine the demand of the states in increasing the royalty rates. In its report submitted in 2013, the panel made out a case for increasing the rates to compensate the resource-rich states for allowing offtake of minerals by end-use industries.

The rates were last revised in 2009 and since then the three states have been persistently demanding upward revision to better their fiscal situation and bridge budget deficits.

Orissa Chief Minister Naveen Patnaik had even favoured imposition of a mineral rent resource tax, popularly called as Windfall Tax, on the Australian model, but the UPA government is not very keen to endorse it fearing a squeeze in investment by private miners.

Currently the royalty rates are on an ad valorem basis, which is computed as per the pit mouth value of minerals by the Indian Bureau of Mines.

But in a recent meeting with Union mines ministry officials, the Orissa government representatives argued that the method does not truly reflect the intrinsic value of the minerals and argued that states are losing revenue.

With similar views pouring in from Jharkhand and Chhattisgarh, the Centre is learnt to be preparing to recommend hiking the royalty rate for iron ore to 15 per cent from the currently 10 per cent.

It is set to propose hiking the rate of phosphates to 12.5 per cent from 11 per cent, for metallurgical bauxite to 0.6 per cent from 0.5 per cent and lead from 1.7 per cent to 14.5 per cent.

The official added while the decision would help enrich the coffers of the states, it would help in generating industrial investment in the country as end-use industries would feel encouraged to set up manufacturing units near mining areas

The NDA government is seeing the hike in royalty rates as being crucial to Centre-State relations.

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