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Mineral-rich States agree to 5% hike in iron ore royalty rate

Royalty for iron ore would now increase from 10 to 15% once a mines ministry-appointed committee's report is approved by the Union Cabinet

In a significant move which is expected to infuse greater funds in states' coffers, a hike of five percent in royalty rate for iron ore suggested by a Mines Ministry panel has been accepted by all the mineral-rich states.

Royalty for iron ore which is currently 10% would now be 15% once the panel's report is okayed by the Union Cabinet. Interestingly though Odisha, which is the biggest iron ore producing state in the country, according to sources privy to the information, expressed its unhappiness over the five percent hike in iron ore royalty rate, calling it "inadequate". The state has been calling for at least 10% increase in royalty rate for the key mineral.

The eastern state though was the lone dissenter as the crucial suggestion received unanimous approval from all the other mineral-rich states during a meeting held on June 21 between them and a Working Group of the Mines Ministry which had prepared the report suggesting major hike in royalty for all key minerals. The acceptance of the panel's recommendations has paved the way for its implementation once it is cleared by the Cabinet.

Apart from Odisha, the industry body Federation of Indian Mineral Industries (FIMI) whose representatives were also present in the meeting, also was disappointed by the panel's decision to hike royalty rates of all the key minerals, albeit for a different reason, as it felt that a significant increase would affect their margins.

Royalty is a charge which the mine owner has to pay to the concerned state government, under whose jurisdiction the mine which the entity is exploiting, falls. It is not related to profits earned by the mine owner (or the lease holder), but is usually related to the quantity of mineral exploited by the entity.

Meanwhile the Working Group which is led by Special Secretary in the Mines Ministry Gauri Kumar, will now present its report to Mines Minister Dinsha Patel and subsequently the ministry will place the report before the Cabinet for its approval in the coming weeks, sources said.

Apart from iron ore, royalty rates for several other minerals like zinc, aluminium, lead and copper have also been upwardly revised, sources informed, however the extent of the hike is not clear. Iron ore being the key mineral, which is mined the most, though is expected to generate greater revenue for states like Odisha, Goa, Maharashtra, Chhattisgarh and Jharkhand, with its royalty rate now hiked by five percent.

The amount of revenue generated through mining alone by Odisha as a case in point, gives an idea of how crucial the royalty rate hike is for state governments' coffers. In 2012-13, Odisha's mining revenue was `5,352.94 crore, while in 2011-12 it was `4,586.64 crore. With the states accepting the hikes suggested by the panel, it would be after a gap of four years that the royalty rates would undergo an upward revision, though they should be ideally revised after every three years.

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