CCEA approves 10% ad valorem royalty on iron ore

Iron ore miners will have to pay 10 per cent of the market price of the mineral as royalty to the government as against the current practice of a fixed rate, with the Cabinet Committee on Economic Affairs approving the proposal, a top top mines ministry official said.     

Besides iron ore, mining firms will also have to pay more as royalty on minerals like copper, zinc and lead, a move that will fetch about Rs 4,600 crore to the exchequer, he said.     

"The CCEA has approved 10 per cent royalty on iron ore. Royalty rates on many other minerals have also been revised. A formal notification for the same is likely to be issued in a day on two," a top mines ministry official told PTI.     

 

"The government is likely to earn Rs 4,629 crore from the changes in the royalty structure based on the production levels of 2007-08," he said. In 2007-08, the government had earned an estimated Rs 2,280 crore. Last fiscal's details could not be ascertained.     

From iron ore alone, the government is expected to get Rs 2,223 crore, he said, adding in 2007-08, iron ore contributed Rs 378 crore to the coffers. Royalty is the amount paid by companies to the state governments for mining the mineral.

At present, iron ore carries a fixed royalty of up to Rs 27 a tonne, depending on its variety and grade. The proposal is to levy 10 per cent royalty on its prevailing market price.     

The practice of market-price-linked royalty is not new to the sector as the government charges a fixed percentage on the sale price of minerals like copper, zinc and lead, diamond and chromite on ad-valorem basis. A change in the royalty rates of such minerals have also been passed by the cabinet, he added.    

On copper, the royalty rate has been revised to 4.2 per cent from 3.2 per cent of the prevailing London Metal Exchange (LME) prices, while on zinc and lead it is 8 per cent and 7 per cent from 6.6 per cent and 5 per cent, respectively.     

The royalty rates on minerals are normally revised every three years. The last assessment was done in 2004, so a revision is due since 2007. The ministry has been working on proposed changes in royalty for the last two years.     

The Committee of Secretaries, who met in the first week of June to finalise the new royalty rates, had favoured the policy which was pushed by a high-powered study group.     

The proposal for linking royalty with market price of iron ore and other minerals had found priority in the 100-day agenda of the Mines Ministry as well.