KOLKATA (miningweekly.com) – Indian provinces are stepping up pressure on the federal government to increase the royalty rates on the coal mined within their respective territories.

Most of the coal-bearing provinces are demanding that the Indian government announce revised royalty rates when the national Budget is presented to Parliament on February 1.

These provinces believe the revision of royalty rates is long overdue and that the Indian government is dragging its feet in revising the rates. This, they say, is having a detrimental impact on revenue accrual.

Existing rules specify that coal royalty rates are to be revised by the government every three years. The last revision effected was in April 2012.

Although the coal-bearing provinces have yet to make a concerted move to take up their demands for a revision of royalty rates with the federal government, each is seeking a hefty upward revision.

For example, the central Indian province of Chhattisgarh wants its royalty rate to increase to 30% ad valorem, up from the current 14% ad valorem.

The eastern Indian province of Odisha has pointed out that, at the existing royalty rates, coal-bearing provinces earned about Rs 114/t ($1.60/t) of coal at the current domestic coal price and exchange rate. The federal government, meanwhile, had imposed a clean coal cess of Rs 400/t ($6/t), with the provinces not entitled to any share of the cess, which was “discriminatory and detrimental to interests of the states”, the provincial government pointed out.

Coal Ministry officials have said any decision to revise royalties “is a national decision impacting economic growth and industrial production across the country and could not be taken solely based on the interest of respective coal-bearing provinces alone.”

The officials argued that any hike in coal royalty rates would also increase the production costs of thermal power companies, contribute to higher electricity tariffs and, therefore, be counterproductive at a time when the demand for electricity from industrial sectors is stagnating.