Govt hikes royalty rates on minerals

The government today gave nod to increasing royalty rates on minerals including iron ore and bauxite, a long-awaited move that will significantly swell the annual revenue of states.
"Cabinet in-principle approved revision of mineral royalty. There are 55 such items but this excludes coal, lignite and sand for stowing," Communications and IT Minister Ravi Shankar Prasad said after the Cabinet meeting.
"We are satisfied that revision has been done... It has not been revised for a long time," he said, without disclosing the impact of the move in financial terms.
As per some estimates, annual revenue collection of mineral-bearing states could swell over 40 per cent to around Rs 15,000 crore.

Chhattisgarh, Odisha, Jharkhand, Karnataka and Goa are among the 11 mineral-rich states.
The Cabinet proposal had sought to raise the royalty rate on iron ore and chromite to 15 per cent from 10 per cent now.

For bauxite, it wanted the royalty to be hiked to 0.6 per cent from 0.5 per cent now.
There were also plans to hike the rate for manganese to 5 per cent from 4.2 per cent.
The rates of royalty, revised in every three years, for major minerals excluding coal, lignite and sand for stowing were last revised in August, 2009. It is charged on ad valorem basis, depending on increase/decrease in mineral prices.

The current proposals are based on the recommendations of a 17-member study panel set up by the UPA-II regime in 2011.
Royalty is a tax levied by government on miners in lieu of transfer of ownership rights of mines. While the government views it as a source of revenue, industrialists look at it as part of production costs.
There are 51 minerals prescribed in the second schedule of MMDR Act 1957 and the rates vary from mineral to mineral.
Almost all minerals including bauxite, limestone, zinc and copper would be impacted by new royalty rates.
States like Odisha have been asking for a steep hike in the royalty rates for the minerals. While the royalty is collected by the states, the Centre is bestowed with the power to revise them.