New commission sought to review mineral royalty rates

In a move aimed at dissuading the mining community from profiteering and virtually regulating the royalty system on iron ore...

In a move aimed at dissuading the mining community from profiteering and virtually regulating the royalty system on iron ore,the Centre is likely to seek the Parliaments approval for setting up a National Mineral Royalty Commission (NMRC). The commission,among other things,would review the royalty rates for major minerals and re-visit the guidelines to introduce calculation of rates on an ad valorem basis periodically.

The mines ministry has inserted a new clause in the Draft Mines and Minerals (Development and Regulation) Act 1957 to be taken to the Parliament,wherein it has proposed to set up the NMRC to suggest progressive royalty rates for various minerals having regard to international practices and also to suggest mechanisms to improve royalty realizations and penal action for failure to pay royalty on the minerals extracted, a top union mines ministry official told The Indian Express.

This the ministry has done to apparently restrain from profiteering the miners who have been earning substantial revenues from exporting minerals,mainly iron ore at spot rates. The steel industry has been complaining from time to time that iron ore was a finite resource and was likely to exhaust within the next 25-30 years if it was not utilized in a just manner in view of the mega expansions announced by various utilities. According to the ministrys proposal,the NMRC would suggest suitable mechanisms to moderate royalty to support investments in remote areas for induction of special technology or for promoting mineral beneficiation or to produce downstream products of strategic value. The government has notified a new royalty regime on August 2009 according to which currently the royalty for iron ore is levied at the rate of 10 per cent on an ad valorem basis on the sale price.

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But the Federation of Indian Mineral Industries (FIMI),the apex body of miners,found it surprising that for the first time since the formulation of the MMDR Act (1948,1957 and subsequent amendments),the industry was not taken on Board of the National Mineral Royalty Commission.

In our country,the nature of the bureaucracy is such that it goes on shifting and has more of a journalistic approach. Its knowledge is limited and arbitrary and immune to the effects of the repercussions on the health of the industry. Its recommendations would be usury in nature and will result in generating more illegal mining rather than attracting domestic investment or FDI from serious investors, the Federation said in its comments to the ministry on the Draft MMDR Act.

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