'Parameters for mineral auction to include royalty to states'

The parameters for auction of mines for major minerals will not be the same as for coal as leases are most likely to be allocated to bidders who pay states the highest rate of royalty, now pegged at 15 per cent, government sources said.
According to the draft Mines and Mineral (Development and Regulation) Bill, 2014 posted in the Mines Ministry's website seeking public comments, mines will be allocated through the auction route only.
The Bill proposes to empower the Centre to prescribe the terms and conditions and the procedure through which auctions will be conducted.
The parameter of the selection, which would also be laid down by the Centre, would include a share in the production of the mineral or any payment linked to the royalty payable or a combination or modification of the two.

"The final parameter will be decided following discussion with the states. What are States going to do with minerals? Their concern is royalty and they would most likely seek higher rate of royalty than a percentage of the produce," the source said.
Taking that into consideration, revenue for mineral-rich states like Odisha, Jharkhand, Chhattisgarh and Karnataka will be higher than they at present get on the Centre-fixed royalty rates.

Meanwhile, the draft guidelines for e-auction of 74 coal blocks, recently released by the Coal Ministry, suggest that there would be a reserve price for the blocks and the highest bidder there would get the blocks. There would be a cap though on the number of blocks a company can bid for to avoid monopoly.

The government recently revised the long-pending royalty rates on minerals including iron ore and bauxite, a move that ensured significant swelling in the annual revenue of states.
As per the existing practice, royalty rates were revised every three years, for major minerals excluding coal, sand for stowing and lignite. Royalty is charged on ad valorem basis, depending on increase or decrease in mineral prices.
The allocation of mines using payment linked to royalty payable, however, may not augur well with the miners as this would inflate their cost of production resulting in squeezed margins.
Additionally, mandatory contribution to be made to the District Mineral Foundation, aimed at benefiting the project affected people, is likely to be linked with the royalty rate. This is essentially mean the higher the royalty rate, the higher the contribution to the DMF.