New Delhi, April 12: The Cabinet Committee on Economic Affairs (CCEA) today increased the royalty payout to states for coal and lignite — two raw materials crucial to power production.
The rates have been increased to 14 per cent for coal and 6 per cent for lignite in a shift from the earlier graded and complicated system.
The states are likely to get an additional Rs 1,050 crore following the hike.
However, Bengal will not benefit from the move as the Union cabinet had ruled in the 1990s that any increase in royalty would not apply to the state as it charged a cess of 25 per cent, which the Centre felt was not right.
The cess was levied by the earlier Left Front government and is continuing since then.
“The proposed royalty revision is not to be extended to Bengal, unless the cesses imposed by the state government are withdrawn,” a government statement issued after the CCEA meeting said.
At present, state governments earn around Rs 5,950 crore in coal and lignite royalty, which will increase to about Rs 7,000 crore after today’s increase.
“The implementation of the revised rates of royalty will provide coal and lignite- bearing states a reasonable share of the income earned by mining, production and selling of these minerals,” the statement said.
Mineral-rich states such as Odisha, Jharkhand, Chhattisgarh, Andhra Pradesh, Tamil Nadu and Madhya Pradesh, had been lobbying for the shift to an ad-valorem based royalty regime.
The royalty for both the minerals, at present, is based on a formula consisting of an ad-valorem rate and a fixed component.
While the fixed component depends on the grade of coal, the ad-valorem rate is calculated on the basic pit-head price and has been fixed at 5 per cent of the invoice price, excluding taxes and other levies.
Today’s cabinet decision will result in a revenue increase of 17.3 per cent on an average for coal-bearing states and 14.53 per cent for lignite, officials said.
“Royalty on ad valorem basis with higher proportion of mine mouth price of coal is certain to increase the cost of coal procurement for consumers. This will impact power tariffs,” Deloitte analyst Dipesh Dipu said.
Royalty rates for both coal and lignite had not been revised since August 2007.