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Centre,Orissa in turf war over ore royalty rates

The steel ministry has been pressing hard for the withdrawal of this mechanism

Written by Priyadarshi Siddhanta | New Delhi |
April 30, 2012 12:38:17 am

The Centre and Orissa government find themselves on a war footing as the Centre holds the state responsible for stepping on its toes by determining royalty rates of iron ore.

Acknowledging complaints from steel producers that the state is executing a royalty regime which is in contravention to the Mineral Concession Rules (MCR),the mines ministry has demanded an immediate clarification from the state and directed it to expressly abolish the system.

In a recent meeting of a high-level coordination-cum-empowered committee,mines secretary Vishwapati Trivedi observed that his ministry has been receiving complaints from producers and stakeholders that since September 2010 the Orissa government from is charging a flat royalty amount for all categories of iron ore as against the prevalent system of 10 per cent ad valorem royalty. The steel ministry has been pressing hard for the withdrawal of this mechanism.

“Secretary Mines directed that the Orissa government should stop operations of the circular and immediately send a clarification in the matter to the ministry,” says the minutes of the meeting.

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The flat royalty amount is calculated at the rate of 10 per cent corresponding to the maximum value of the highest quality of iron ore lumps. This amounts to imposing a royalty at the highest possible rate.

Justifying the move,the state has argued that screening and crushing of lumps into various sizes produces ore fines,which have lesser value than lumps and causes loss to the exchequer.

As per the rates of the Indian Bureau of Mines,royalty for the fines (58-60 Fe) should be charged at Rs 138 per tonne. Since the state is charging royalty on the sale value of the highest grade of lump ore,the royalty rate currently is Rs 522 a tonne. “The Orissa government has used a loophole in the MCR wherein there is no definition of lump and fine ores. Hence,it has assumed that the entire production from the mine is in the lump form,” ministry sources reasoned.

“The purported logic of the Patnaik government on loss to exchequer is inherently flawed as fines are generated in the process of extraction of ore lumps and it need not be necessarily generated from screening and crushing,” industry body Ficci said in a representation to Trivedi on April 24.

Orissa accounts for 40 per cent of the country’s total iron ore production and most of it is high-grade ore from districts like Sundargarh and Keonjhar.

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