Decision on District Mineral Foundation rates by Aug 31

The Union mines ministry is likely to decide the rates for local benefit sharing through the District Mineral Foundation (DMF) by end-August, after a clearance from the prime minister's office, said an official.

"As expected, the mining sector wants low interest rates while state governments are asking for rates nearing the upper limit," said the official. "The PMO has been kept in the loop because of the sensitivity of the matter."

According to the Mines and Minerals (Development and Regulation) Act, 2015, or MMDRA, the DMF, to be set up by the state governments, will be entrusted with the responsibility of local benefit sharing. "The objective of the DMF shall be to work for the benefit of persons and areas affected by mining operations in such a manner as may be prescribed by the state government," says the Act. According to this law, the central government will decide the percentage (equivalent to royalty) to be paid to the DMF by mine owners of that particular district. For existing miners, the upper limit is an amount equivalent to royalty; for new miners which bid in mineral auctions, the upper limit is an amount equivalent to 33 per cent of the royalty.

Many states are yet to notify the DMF after the new mining law was passed by Parliament in March.

"Some of these districts are likely to receive funds in thousands of crores. Many companies are worried they may end up paying huge sums to the DMF at a time when the commodity market is in decline," said an executive of an Odisha-based mining company.

Apart from payments to the DMF, the companies will also have to pay an amount equivalent to two per cent of royalty to the National Mineral Exploration Trust (NMET). The NMET's funds will be used for regional and detailed exploration as prescribed by the central government.