KOLKATA (miningweekly.com) – Coal-bearing provinces in India have requested higher royalties on the coal produced in their respective geographies, noting that the 14% ad valorem royalty on coal was last revised four years ago.
The provinces, which are seeking an increase in royalties to bolster their revenue streams, have also pointed out that a special committee set up in 2014 to review the royalty rate has not yet submitted its report.
The provincial governments further believe that they should share in the corpus that the federal government has created out of the Rs 400 ($6) a ton levy it introduced under the Clean Coal Cess, noting that local governments require the funds to invest in initiatives aimed at mitigating the “negatives of mining”.
Odisha Chief Minister Navin Patnaik has taken the lead on behalf of the provinces. In a communication to the Prime Minister, he expressed his hope that Narendra Modi would “personally intervene in speeding up the process of hiking the coal royalty rate”.
However, according to a senior government official, the creation of the District Mineral Fund (DMF) has complicated the revision of the coal royalty rates.
It was pointed out that since the DMF for local area development was created out of a levy proportionate to the total royalty payable, any revision to the basic royalty rate would have a cascading impact on the cost of production of miners.
Hence, the impact on mining cost of production would have to be balanced, while assessing the next round of increases in the royalty rate.
At the same time, royalty fixation could be a vexed issue, as the government has not yet reconciled the dual rate of levy imposed towards DMF. For example, in the case of coal mines allocated through the auction route, the contribution towards DMF is fixed at 10% of total royalty payable, while in the case of older coal blocks allocated through the ‘preferential allotment route’ the levy is higher at 30%.
An increase in the royalty rate, therefore, will have a higher cascading impact on cost of production in the case of older mines and a comparatively lower impact in the case of mines allocated through the auction route, and this differential impact will have to be mitigated, the official adds.