Address royalty needs of states: Par panel to Centre

Royalty amount paid to seven major producing states has barely grown about 2.4 times in a decade

The Centre should frequently revise royalty rates paid to states for mining coal so as to improve financial relations between the two sides, a Parliamentary panel has said.

"Low royalty rates and their infrequent revision has become an important irritant in the realm of Centre-state financial relations... Though coal and lignite minerals belong to states, royalty rates are fixed by central government and the grievances of concerned states are not adequately addressed," the panel has said in its latest report.

Royalty rate revision has been due for long and the amount paid to seven major producing states has barely grown about 2.4 times in a decade -- from Rs 1,897.78 crore in 2000-01, to 4,599.24 crore in 2009-10.

Terming the present royalty system as "riddled with complications", Kalyan Banerjee-chaired Standing Committee on Coal and Steel said in a report that the issue be looked at in a larger perspective keeping in view growing needs of states.

"The Committee are constrained to observe that one of the major factors for the downward trend of royalty is the absence of a clear-cut policy on the subject," it remarked in the report tabled in Parliament last week.

It recommended that rationalisation of royalty rates and the timely revision will not only help the backward mineral rich states to improve their non-tax revenues but will also go a long way in improving Centre-State financial relations.

It asked the Ministry of Coal to adopt a holistic approach to the problem and work out a plausible solution.

"It is pertinent to note that non revision of royalty rates for many years has led to decline in the royalty income of the states... Ministry should bring out a clear-cut policy on royalty acceptable to coal producing states which could be revised at periodical intervals," it recommended.

Major coal producing states -- Jharkhand, Orissa, Bihar, Madhya Pradesh, West Bengal, Maharashtra, Uttar Pradesh and Chhattisgarh have been demanding revision in rates of royalty on coal and lignite, which were last revised in August 2007.