Miners seek graded royalty on ore

India exports 100 million tonnes of iron ore to China. 

The Federation of Indian Mineral Industries (Fimi), the apex representative body of mining companies, has urged the government to vary the royalty rate for iron ore based on the content. 

In a letter to Union mines secretary Santha Sheela Nair, Fimi says the current uniform rate of royalty levy below 60 per cent iron content is unjustified, because of the variation in realisation of all grades of steel making raw material. The value of iron ore varies even between the two nearest grades, the price differing by as much as $8-10 a tonne, and hence the royalty should vary accordingly. 

The present levy on iron ores has various slabs for above the 60 per cent grade. But there is only one slab for levy of royalty on all grades below 60 per cent iron content. 

In August, the ministry empowered the India Bureau of Mines (IBM) to collect statewise data and publish it in its monthly newsletter, which is now considered the benchmark rate for royalty collection. The IBM publishes state-wise average sale value for computation of royalty for iron ores above 60 per cent grade, whereas it has earmarked a uniform slab for all grades of lumps/fines below 60 per cent grade. This has become a cause of concern, as ores between 50 and 60 per cent grades will be charged the same royalty as applicable to ores of 60 per cent content, despite the value of the minerals differing substantially. 

The pricing of iron ore of various grades also differs depending upon the proximity of the mines from consumption centres, including ports for exports. 

The National Mineral Policy 2008 emphasizes utilisation of low-grade ores and the ministry has decided a threshold value for ores at 45 per cent iron cutoff grade. Contribution of total production of low-grade iron ores, of less than 60 per cent iron, is presently 30-35 per cent of total production of all grades, and in view of technological upgradation and the demand from China, 55-60 per cent iron grades are being exported after beneficiation. 

In addition, ore fines of 52-58 per cent iron are sold to cement plants at Rs 250-300 a tonne. But, the royalty payable would be at the rate applicable to 60 per cent iron content i.e. between Rs 62-70 a tonne. This is an unduly high production cost. Further, as state governments are collecting “ad valorem” royalty based on average sale value published by IBM every month, the mineowners are forced to pay more for the low value mineral. This may hamper the supply of low grade ores. 

Fimi has suggested fixation of differing royalty on ores based on different grades i.e. 50-55 per cent, 56-58 per cent, and 58-60 per cent iron grades. 

India exports about 100 million tonnes of iron ore, mainly of low grade, to China.