Ore firms slam new royalty scheme

Demand removal of ambiguity in the formula before its implementation.

Iron ore miners are protesting alleged ambiguity in the government’s method for calculating the 10 per cent ad valorem royalty notified on August 13.

Representatives of the industry met officials of the Indian Bureau of Mines (IBM) on Wednesday in Nagpur and demanded that implementation of the new royalty scheme be kept in abeyance till a satisfactory clarity was agreed on.

Federation of Indian Mineral Industries (FIMI) advisor S B S Chouhan, who represented the miners, said, “The notification is silent on the type of iron ore on which the royalty is proposed. Whether it would be calculated on the basis of dry metric tonne, free on board (fob) or ex-mine, the notification does not reveal anything.”

IBM officials have worked out a methodology with fob as the benchmark price, minus transportation charges. The companies say ex-mine ore contains a huge amount of moisture, which dries over a period of time. This cost is being unfairly pushed on the miners, they protest. Chauhan says they suggested IBM charge royalty on dry metric tonne, ex-mine basis.

If the price is ascertained on the current formula, the royalty would be almost 15 times more from the current levy of Rs 27 per tonne, he said.

“We are not averse to the royalty. But before implementing such an ambiguous notification, the government must come out with a clarity on it. Otherwise, it will create havoc for the industry, said Siddharth Rungta, Director, Rungta Mines Ltd.

The thumbrule for calculating the royalty is the IBM-benchmarked rates for each state every month, plus 20 per cent. There has been no explanation for this 20 per cent clause in the notification. If it is on tonnage basis, a majority of tiny and medium size mines would incur losses and have to close, feared Chauhan.

The Cabinet Committee on Economic Affairs (CCEA), on July 31, approved the 10 per cent ad valorem royalty rate on iron ore, besides hiking the levy on minerals like copper, zinc and lead. India exported 106 million tonnes of the total production of 223 million tonnes of iron ore in 2008-09.