Karnataka rakes in Rs 270 cr royalty from iron ore e-auctions

Despite a halt on iron ore mining in Karnataka since July last year, the state government has earned a royalty revenue of Rs270 crore, about 62 per cent of the total royalty earnings in the last financial year. With two more months in the current financial year, royalty revenues are likely to go up further.

Mining activity came to a halt in July, when the Supreme Court ordered the closure of mining and transportation of iron ore in Bellary district. Subsequently, on August 26 the apex court also ordered closure of mining in Chitradurga and Tumkur districts.

However, through its orders dated September 2 and 23, the court had permitted sale of about 25 million tonnes (mt) of iron ore from the stockpile at various leases in Bellary, Chitradurga and Tumkur districts to ensure supply of ore to domestic steel mills, sponge iron and pig iron units, in and around Karnataka. A monitoring committee comprising forest officials of Karnataka and the director of mines and geology (DMG) was constituted to supervise the sale of ore through electronic auctions.

Till January 6, the monitoring committee had conducted 18 e-auctions, through which close to 11 mt of iron ore was sold for Rs2,694 crore. On this sale, the state department of mines and geology has collected royalty of Rs269.4 crore at 10 per cent and Rs323.3 crore towards forest development tax (FDT) at the rate of 12 per cent.

According to the final report on the status of mining leases surveyed by the joint team of the Central Empowered Committee (CEC), the average sale price of iron ore works out to Rs2,455 a tonne.

With this, the royalty receivable by the government for the sale of 25 mt of iron ore through e-auction may exceed the total royalty received by it for ore during 2010-11, sources close to the process told Business Standard.

In addition, about 700,000 tonnes of iron ore dump belonging to the state-owned Mysore Minerals Limited (MML) and lying outside its sanctioned lease boundary has also been sold for Rs79.8 crore (and the royalty, FDT payable on the sale), at Rs1,140 a tonne. Earlier, MML used to sell the over burden/waste dump at substantially lower rates.

According to information provided by the DMG to CEC, during 2010-11, the state government received Rs435 crore as royalty for 33.75 mt of iron ore produced and sold in the state. The average rate works out to Rs129 a tonne.

DMG is also likely to witness a huge rise in its royalty earnings once regular mining restarts. The CEC has recommended that when the Supreme Court permits resumption of regular operations, the entire production should be sold through e-auctions, under overall supervision of the Monitoring Committee.