Govt hikes royalty rates on minerals

The Centre on Wednesday approved an increase in royalty rates on minerals, including iron ore and bauxite, which will significantly swell the annual revenue of states.

“Cabinet in-principle approved the revision of mineral royalty. There are 55 such items, but this excludes coal, lignite and sand for stowing,” Communications and IT Minister Ravi Shankar Prasad told reporters after the Union Cabinet meeting.

As per some estimates, annual revenue collection of mineral-bearing states could swell over 40 per cent to around Rs 15,000 crore. 

The Cabinet proposal had sought to raise the royalty rate on iron ore and chromite to 15 per cent from 10 per cent. For bauxite, it wanted the royalty to be hiked to 0.6 per cent from 0.5 per cent. There were also plans to hike the rate for manganese to 5 per cent from 4.2 per cent.

The rates of royalty, revised every three years, for major minerals excluding coal, lignite and sand for stowing, were last revised in August, 2009. It is charged on ad valorem basis, depending on the increase/decrease in mineral prices.

Royalty is a tax levied by government on miners in lieu of transfer of ownership rights of mines. While the government views it as a source of revenue, industrialists look at it as a part of production costs.

There are 51 minerals prescribed in the second schedule of the MMDR Act, 1957, and the rates vary from mineral to mineral.

Almost all minerals, including bauxite, limestone, zinc and copper would be impacted by the new royalty rates, said a statement released here.