Orissa pitches for revised formula to fix coal royalty

Peeved over the inadequate royalty on coal payable to the state and delay in revision of the royalty rate, the Orissa government has urged the Centre to come out with a new formula for fixing coal royalty rate.

In a letter to Prime Minister Manmohan Singh, Orissa Chief Minister Naveen Patnaik has stated that the price on which royalty is charged should be based on the market price of the relevant grade of coal and not to the notified price declared by Coal India Ltd (CIL).

Patnaik has suggested that a system of arriving at the market price for any grade of coal can be formulated by the Ministry of Coal. He has argued that this will not have any substantial impact on the electricity tariff in the country as coal is being supplied to the power plants at a heavily subsidized price (notified price of coal).

Orissa minister for industries and steel & mines Raghunath Mohanty said, “The state government has repeatedly drawn the attention of the Centre on revision of coal royalty rate. Chief Minister Naveen Patnaik has sought the intervention of the Prime Minister on the issue in a letter on February 22 this year”.

According to a copy of the letter provided by the minister, the Chief Minister has stated that the hybrid formula should be done away with and coal royalty rate may be calculated on ad-valorem basis at the rate of 20 per cent of the market price of coal.

Presently, the royalty on coal is linked to the coal and the basic notified price of coal fixed by CIL. Patnaik has pointed out that both these elements (grade and notified price) for power grade coal (E, F and G varieties) are very low. Consequently, the amount payable to the state government is also very low and is inadequate for taking up the required measures to mitigate the adverse impact of mining, particularly open cast mining of coal.

He has also demanded that the state should be entitled to compensation in case of delay in revision of the royalty rate. "While a study group has been formed in the Ministry of Coal for revision of royalty on coal, the enhancement is yet to come. As a result, Orissa is incurring a huge loss in terms of royalty”, Patnaik has stated in his letter to the Prime Minister.