Hike in royalty on iron ore would make mining unviable: GMOEA

A 5% increase in royalty rate for iron ore, as proposed by the Centre, will make substantial portion of mining the ore in the country unviable, an industry body has said.

In a representation to the Union Mines Ministry, Goa Mineral Ore Exporters' Association (GMOEA) said that any hike in royalty rate for iron ore would "deter the mining of lower grade ore which is detrimental to the conservation of mineral."

Currently, the royalty is charged at the rate of 10% of sale price on ad-valorem basis from the iron ore miners. The Mines Ministry is considering a proposal to increase it to 15% and a study group on revision of rates of royalty has been constituted by the ministry.

The last increase in royalty rate of iron ore was made in August, 2009 and according to the provisions of the Mines and Mineral (Development and Regulation) Act, 1957, the rates can get revised after three years, if necessary.

However, GMOEA -- an industry body of miners in Goa-- said that any hike in royalty rate would affect the industry, particularly to the producers of lower grades of iron ore and listed out several issues concerning the miners.

According to it, the new mining bill has already proposed payment of an amount equivalent to the royalty paid by the miners to the District Mineral Foundation. Besides, the royalty payable on iron ore in the country, at 10% currently, is much higher than other mineral-rich nations, it added.

"This would made substantial portion of mining in the country unviable," the GMOEA said.

As per the industry body from Goa, Australia charges between 5 and 7.5%, while Indonesian rate is at 3%. Besides, China's rate is at 2%, while in Brazil, it is less than 3%. Other iron ore producing countries like Canada, South Africa and Chile do not levy any royalty.

It also claimed that iron ore industry in the country is highest taxed sector and over 50% of its total sales realisation is paid back to the state governments and the Centre through various taxes.

Noting that mining is cyclical industry, GMOEA said that outlook for the sector is negative currently and the prices of iron ore are forecasted to decline due to reduction in demand from China.

Amid the scenario, increasing the royalty rate would spell doom for the industry, particularly for the producers of lower grade iron ore, it said.

"Any decision taken to increase (the royalty rate) will have a drastic result on low grade producers such as Goa," the mineral industry body from Goa said, adding that there is no market in India for Goan iron ore due to its inferior quality.

The Goan iron ore's quality ranges between 46% to 59% of Fe. Most of the ore from the state is exported as it can be beneficiated to a limited extent and there are limited buyers of the mineral in the country.