Govt mulls 10% cess on minerals' royalty

The government is considering levying up to 10 per cent cess on royalty charged on minerals like iron ore, copper and lead that would be used to promote scientific mining practices — an idea opposed by the mining industry.    

The proposal for the levy is part of a draft bill being formulated to replace the Mines and Minerals Development Regulation Act (1957), a senior ministry official said.     

"The central and state governments may levy and collect a cess on major and minor minerals respectively, at a rate not exceeding 10 per cent of the royalty in such a manner as may be prescribed," the official added.     

The proceeds would go to the proposed 'National Mineral Fund' and 'State Mineral Fund' for promoting scientific management of mining and mine closure, local development and preventing illegal mining among others, the official added.     

The mining industry, however, has opposed such a levy, saying it would hit hard the margins of firms which have already been asked to pay up to 10 per cent royalty on the market price of minerals such as iron ore.

Opposing such an additional levy, the president of the miners' body FIMI, Siddarth Rungta, said, "We have to pay up to 10 per cent royalty on minerals like iron ore now. Government should not overburden us with further levy."

Industry analysts say the cess, estimated to mop up around Rs 1,500 crore, would be an extra burden on the mining firms and may push up the cost of vital minerals.     

Last month, the government notified market-linked royalty rates on major minerals like iron ore. Iron ore would attract a maximum royalty of 10 per cent on the prevailing market price. Earlier, the royalty was linked to production.     

FIMI had opposed market-linked royalty on minerals and instead asked the government to hike the levy in the production-linked system.     

On copper, the royalty rate has been revised to 4.2 per cent from 3.2 per cent of the prevailing London Metal Exchange (LME) prices, while on zinc and lead it is 8 per cent and 7 per cent from 6.6 per cent and 5 per cent, respectively.     

The government is expected to place the bill to enact a Mines and Minerals (Scientific Development and Regulation) Act in the winter session of Parliament.