Odisha, the largest iron ore-producing State, has demanded an increase in the royalty rate of the ore to 20 per cent of the sale price on ad-valorem basis taking into account either the FoB price of the NMDC or 10 per cent less from the CIF price in China.
Principal Secretary Steel & Mines Rajesh Verma recently sought the hike while presenting the Sate Government’s views to the study group on revision of rates of royalty and dead rent for minerals.
The study group headed by Special Secretary, Union Ministry of Mines, has proposed to raise the royalty rate on iron ore to 15 per cent of the sale price on ad-valorem basis, up from 10 per cent presently.
Verma said supernormal profit or windfall gains being generated in the iron ore mining sector far exceed the level of investment or risks involved in the mining activity. These vast profits run into thousands of crores of rupees competing with the State’s annual plan size. However, the State unfortunately gets only a meagre amount in terms of royalty, while fabulous profits are being made by a few private mining companies.
Verma said the lessees earn abnormal profits in mining of iron ore and the percentage of average profit before tax (PBT) to ex-mines cost ranges between 304.47 per cent and 1,423.89 per cent in case of iron ore.
He said that taking this type of supernormal profit into account, the Mineral Resources Rent Tax (MRRT) should be levied on iron ore, to be charged at 50 per cent of the surplus rent, which should accrue to the State adding as and when surplus rent decreases the tax too would automatically decrease. The tax collected would be utilised for improving social and physical infrastructure and strengthening welfare measures to improve the livelihoods of poor people.
The study group has been formed to hike royalty of iron ore, manganese, chromite, bauxite, limestone and dolomite. The study group has suggested royalty for iron ore at 15 per cent of the sale price against 20 per cent demanded by the State. Similarly, for all grades of manganese ore, the group has recommended royalty at five per cent of the sale price, lower than the State's demand of 12 per cent.
On chromite, it has recommended a hike of 2 per cent from the existing 10 per cent, while the State has demanded 20 per cent of the sale price on ad-valorem basis taking into account either FoB price of the NMDC or 10 per cent less from the CIF price in China.
For manganese of all grades, the study group has suggested a minor hike from 4.2 per cent to 5 per cent as against the demand of the state of 12 per cent. On manganese concentrates, the group has suggested that the existing rates may continue, while the State demanded the hike from 1.4 per cent to 4 per cent.
Rates of royalty for minerals were effected from 2004 and the present rates were effected from August 2009 though the same were due in 2007.
During 2008-09, Odisha collected royalty to the tune of Rs 1,380.59 crore, which went up to Rs 2,020.71 crore in 2009-10.In 2010-11, the State collected Rs 3,330.46 crore, in 2011-12, Rs 4,586.64 crore and in 2012-13, Rs 5,352.94 crore of royalty from various minerals, according to official sources.