File picture of a mine in Odisha.

Bhubaneswar, April 27: The Centre has refused to impose mineral rent resources tax on supernormal profits in iron ore as demanded by the Odisha government, at least for the time being.

The Centre intimated its decision to the Odisha government this week after examining its demand for nearly four months. On January 25, chief minister Naveen Patnaik wrote to the Centre demanding that mineral rent resources tax be imposed.

In reply to his letter, Union minister of state for mines, Dinsha Patel said: “It may not be prudent to generalise that the entire iron mining sector is earning profits to the scale equivalent to the National Mineral Development Company (NMDC), considering that it is a fairly larger miner enjoying high grade deposits.”

The Centre also reminded the Odisha government that the royalty was levied at pit mouth value on minerals and not on the free on board (FOB) values, that applies at the shipping point.

“The FOB value would also include the cost of transportation and handling charges, on which royalty cannot be levied. It may not be appropriate to only see the FOB values of iron ore to come to the conclusion that super profits are being generated,” the minister in his letter stated.

Instead of agreeing to impose mineral rent resources tax, the Centre said that in the new Mines and Mineral Development and Regulation bill, there was a provision to set up the district mineral foundation wherein every miner would be required to pay an equivalent amount of royalty and also there were provisions for state minerals funds which could serve as a substitute to the suggested minerals rent resources tax.

The minister further said the government of Odisha, as a part of the study group for review of royalty rates and dead rent constituted in the ministry, would have sufficient opportunity to effectively contribute to developing a mechanism to work out a rational rate of royalty on iron ore, which would adequately ensure fair compensation to the Odisha government.

The Centre further said that with tighter monitoring of the values reported by the miners, the average price per tonne for iron ore reported in Odisha was comparable and sometimes even better than the average prices in Chhattisgarh or Karantaka.

The minister said the higher royalty revenues sought by the Odisha government for the local people made sense only when appropriate delivery mechanisms for the benefits sharing were made effective. There is an immediate need for the state government to focus on ensuring the benefits accruing through royalty collections are flowing transparently to the local populations in the mining areas with visible benefits.

The ministry also asked the Odisha government to ensure that all miners, traders and exporters should register themselves online with the Indian Bureau of Mines.