Centre asks Odisha not to charge higher royalty on iron ore

At loggerheads with Odisha government on complaints that it is charging higher royalty on iron ore, the Centre has asked the state to "immediately withdraw" the notification in this regard.

"The circular ... Dated 7.9.2010 of the state government is not in consistence with Rule 64 B of Mineral Concession Rule (MCR) and should be immediately withdrawn by the state government to avoid litigation," Mines Ministry  said in a letter to the Odisha government.

The Odisha government has been charging royalty at the highest value of iron ore lumps and fines through the said circular, the Ministry said.

The Centre took up the issue after some steel producers complained the state is charging flat royalty as against the prevalent system of 10 per cent ad valorem royalty.

The flat royalty amount is calculated at the rate of 10 per cent corresponding to the maximum value of the highest quality of iron ore, which amounts to a royalty at the highest possible rate.

The Ministry has examined the issue in consultation with the Indian Bureau of Mines and said the royalty shall be levied on the processed mineral ore that is removed from the leased area.

In case the run-of-mine is processed outside the lease area, then royalty shall be charged on the unprocessed mineral removed from the lease area, it said.

Besides asking the state to immediately withdraw the said circular "in the interest of proper mineral regulation as per statute," the Centre has also asked the state to "immediately put in place an independent mechanism to check whether the pit mouth value of processed iron ore lumps is properly reflected in the returns filed by the miner".

The state accounts for about 40 per cent of the country’s total iron ore production.

Last month Odisha Mines Minister Raghunath Mohanty had said: "State government is charging royalty on ad valorem basis and there has been no violation of rules".

Dissatisfied with the present royalty rates, Odisha has demanded a multi-fold increase in the levy.

Odisha Chief Minister Naveen Patnaik, in a letter to Prime Minister Manmohan Singh, had said the mining industry is earning "super normal profits" at the cost of the state.

He had demanded a 50 per cent mineral resource windfall tax, taking a cue from Australia, which has decided to levy higher taxes on iron ore from this month.

Union Mines Minister Dinsha Patel, in a letter to Patnaik earlier this year, had said : "This issue would be taken up by the Study Group on Royalty and Dead Rent... Where the state government of Odisha is also a member.