New Delhi, Aug. 20: The government today gave its approval to raise the royalty rates on minerals, including iron ore and bauxite, a long awaited move that will boost the annual revenue of states.
However, the royalty rates for coal and lignite have not been raised, taking note of state electricity boards’ apprehensions that this could raise the cost of power generation. The royalty was raised on 23 of the 51 minerals whose rates can be decided by the central government.
The royalty rate for manganese ore was raised from 4.2 per cent to 5 per cent, while for iron ore and chromite it was raised from 10 per cent to 15 per cent. Bauxite rates were raised from 0.5 per cent to 0.6 per cent.
Odisha, Jharkhand, Chhattisgarh and Karnataka have been demanding a revision in the rates.
Under Indian law, royalty has to be paid by miners to state governments.
Officials said the states stood to gain Rs 4,000 crore from the hike, with total mineral royalty payout going up from approximately Rs 9,400 crore to Rs 13,400 crore.
Iron is mined by steel mills for captive use as well as by miners who sell to domestic mills and foreign markets, including to China, which is the largest consumer of iron ore exported out of India.
The increase in royalty rates will eat into the profits of steel makers such as SAIL, Tata Steel, Jindals and Essar as also mining companies such as Rungta Mines and Sesa Sterlite.
Odisha chief minister Naveen Patnaik had earlier asked the newly elected NDA government to raise mineral royalty from 10 per cent to 15 per cent and had also suggested a Mineral Resource Rent Tax (MRRT) on the sector.
Officials said MRRT, which was imposed in Australia two years back, is a tax on super profits generated from mining.
Other states had demanded that the increase be steeper at 20 per cent. However, the steel ministry and the Federation of Indian Mineral Industries had strongly objected to the hike.
The chief ministers of mineral-rich states — Chhattisgarh, Odisha, Jharkhand, Karnataka and Rajasthan — had last year sought a similar revision from the UPA government.
Royalty rates for minerals were increased in 2009 with ad-valorem taxes imposed on a host of minerals, including iron, coal, rock phosphate, bauxite and copper. However, fixed rates per tonne remain on other minerals such as asbestos and limestone. In 2012, royalty rates for coal and lignite were increased.
The Centre has been fighting against paying higher royalty rates for coal and iron as this would push up costs for user industries — power and steel plants.
Coal accounts for more than half of the cost of power generation and will be required for 85 per cent of the 76,000 megawatts additional capacity targeted in the next five years. Increase in coal prices because of higher royalty pay-outs will be reflected in costlier electricity.
Exporters of iron ore could face a Mineral Resource Rent Tax in case iron ore mining and exports are allowed again after a hiatus because of environmental and legal action that has seen leases being cancelled and mining stopped in many areas.
The government today reduced the minimum export price (MEP) of onion to $350 per tonne following improvement in domestic supply situation and the softening of prices.