New ore duty to fill Orissa coffers

CCEA has given the green light to an ad valorem royalty mechanism.

Revenues from iron ore for states such as Orissa is expected to go up substantially following the decision of the Cabinet Committee of Economic Affairs (CCEA) to levy royalty on iron ore on an ad valorem basis.

The CCEA yesterday approved a proposal to levy 10 per cent of market value as royalty on iron ore instead of a fixed rate for different grades of ore.

Orissa has been demanding the adoption of an ad valorem-based royalty system for all minerals for a long time.

Though the exact benefit was yet to be assessed officially, the gain could be about Rs 450 crore this year. If the price of iron ore increased further, royalty could be more. The additional revenue from iron ore was expected to help the state government in achieving the overall mineral revenue target of Rs 1,600 crore for 2009-10.

Sources said, the state was able to collect Rs 1,340.13 crore from the mining sector during the last financial year against the target of Rs 1,250 crore. The government is eyeing a revenue of Rs 1,600 crore from the mining sector during the current financial year.Sources said, royalty from iron ore at Rs 149.83 crore during 2008-09 was likely to increase to about Rs 600 crore during the current financial year.

However, this was possible if the new rate came into force immediately and the last year’s iron ore production level was maintained during this year. While the highest grade of iron ore carries the maximum fixed royalty of Rs 27 per tonne, the average per tonne royalty is expected to go up to about Rs 140 per tonne after the revised rate comes into force.

This estimate is based on prices ranging between Rs 1,050 and Rs 1,700 per tonne fixed by the Orissa Mining Corporation (OMC).The production of iron ore in the state increased to 77.19 million tonnes in 2008-09 from about 46.06 million tonnes in 2004-05. While internal consumption increased from 29.57 million tonnes to 53.89 million tonnes during this period, despatches for exports increased from 10 million tonnes to 16.35 million tonnes during the last financial year.

However, export despatches during the last financial year were lower compared to the previous two years. Despatches were 17.04 million tonnes in 2006-07 and 20.05 million tonnes in 2007-08. The average price of iron ore lumps sold by OMC was Rs 1,689 per tonne having 62 per cent Fe content, and Rs 1,052 per tonne for lumps having 60 per cent Fe content during 2008-09.