Andra Pradesh to see slide in mining income

A steep increase in iron ore royalty for the full 12-month period this year to mineral rich states like Odisha, Karnataka and Chhattishgarh may displace Andhra Pradesh from its top position in terms of government revenues coming from the mining sector.

AP being a small player on the iron ore front does not enjoy the same benefits as these mineral rich states.

“In volume terms iron ore-rich states were better placed in royalty collections than Andhra Pradesh, even though we topped all these years on the back of better realisation and taking minor minerals fully on board,” a senior official of the directorate of mining, AP, told Business Standard.

The state has so far maintained the top position in mining income despite stoppage of iron ore production at Obulapuram mines that resulted in a loss of Rs 200 crore to the exchequer this year. Operations at Obulapuram mines, owned by Karnataka minister Gali Janardhan Reddy, have been stopped on allegations of illegal mining.

Sequential comparison
In 2009-10, AP earned Rs 1,971 crore from mining (Rs 1,755 crore in the previous year), Karnataka Rs 842 crore (Rs 493 crore), Chhattisgarh’s income stood at Rs 1,641 crore (Rs 1,266) and Odisha’s was at Rs 1,965 crore (Rs 1,381 crore). The sequential comparison shows a substantial jump in revenues of iron ore-rich states last financial year mainly because of the enhanced royalty on iron ore from the previous Rs 11-26 per tonne to Rs 160-200 depending on the grade in August 2009.

The AP government collected Rs 1,452 crore from the mining sector by the end of December, 2010, as against Rs 1,295 crore in the corresponding period previous financial year. However the department is set to miss the revenue targets for the full year, pegged at Rs 2,695 crore, due to stoppage of iron ore production among other factors. Iron operations in AP remained a meagre 5-6 million tonnes a year on average till recently as against 45-50 million tonnes in Karnataka and around 70 million tonnes in Odisha.

Income from minor minerals
Unlike other mineral rich states, AP gets its income from coal, barytes, felspar, quartz, laterite, silica sand, dolomite and limestone besides onshore hydro carbons.

The state is also endowed with internationally known black, pink, blue and multicoloured granites. It does not get any royalty from the deep sea Krishna-Godavari Basin operations as these fall outside the state’s territorial authority.

The other major reason contributing to AP’s top position is minor minerals — 40 per cent of its total mining income comes from minor minerals, such as sand. The same in other states is negligible, according to officials.

“Silica sand forms a major source of our income from minor minerals as the government gets good revenue from auctioning sand quarries. This has not been a practice outside the state and only Maharashtra has shown interest in recent times,” the official said.

As new areas of mining operations are yet to open up, the state is unlikely to see any big jump in revenues. While bauxite is one new area, which has attracted projects with proposed investment of Rs 27,000 crore in Visakhapatnam and Vizianagaram districts, little has been done in the last one-and-a-half years in this regard.

Reconnaissance and exploration for diamond deposits though launched by several multinational companies in different parts of the state seven years ago, has so far not given any encouraging results. “Recently De Beers relinquished the areas in Anantapur and Kurnool after finding no positive results from the exploration,” said an official.