Mines Min adds clause to draft MMDR Bill in move to empower mineral-rich states
The mining community may have to take a further hit on their profit margins if the mines ministry has its way.
After securing the Group of Ministers (GoM) approval on mandating mining companies to share 26 per cent of their net profits with people displaced by their projects, the ministry has now sought the GoM’s approval to empower mineral-rich states to levy a cess of up to 10 per cent on minerals extracted in their territorial domain.
In its revised version of the Draft Mines and Minerals (Development & Regulation) Bill, 2010, the ministry has added a clause stating that “the state government, may by notification specify, that there shall be levied and collected a cess on major or minor minerals extracted at a rate not exceeding 10 per cent of the royalty in a manner prescribed by the state government. Provided that the cess shall not be increased more than once during five years.”
The GoM, comprising 10 union ministers and headed by finance minister Pranab Mukherjee, will deliberate these proposed provisions in its meeting. Deliberations on the Bill are understood to have reached their last leg and, after approval of the GoM, would be taken to the Cabinet. Meanwhile, the Planning Commission has asked the GoM to consider — besides the 26 per cent profit sharing formula-imposing a 5 per cent cess on royalty accruals “exclusively for paying compensation to the affected populace till the miner began paying royalty.”
On the proposed 26 per cent profit-sharing mechanism, the Commission, had earlier argued that it may not be the ideal way, as mining companies might declare less profits/no profits or losses.
Moreover, mining being a location specific activity, some affected persons might get more compensation than others, it had contended. So, the Panel suggested, an amount equivalent to say 26 per cent of royalty accruals be charged from mining firms instead of profit sharing and allotment of equity shares, and the money be earmarked for contribution to the state’s special fund for distribution to affected persons.
Signifying its determination to clamp down on exports of mineral ore, the ministry has inserted a provision in the revised Bill that every person “using or trading in or exporting major minerals register himself with the state government”.
It has also specified that the Centre may notify a cess on major minerals “as a duty of customs, where the ore is exported and the rate shall not be increased more than once in five years.”
Regarding the proposal mandating miners to share their net profits, mines minister BK Handique had suggested that they pay 26 per cent of their net profits for the previous financial year from mining related operations, which was unanimously endorsed by the GoM.
According to the revised Bill, “where the holder of the mining lease is a company, it shall allot at least one share at par for consideration other than cash to each person of the family affected by mining related operations and such shares shall be non-transferable”.
It says that the Articles of Association of the firm referred to in the Bill’s sub-section-III shall contain articles to allot shares in accordance with the provisions.
Companies holding mining leases have been mandated to provide employment and other assistance “in accordance with the Rehabilitation and Resettlement Policy of the concerned state government”, according to the Bill.
Eager to ensure compliance to this provision, the Bill mandates that the companies failing to adhere to the stipulated provisions might have to forfeit their security deposits besides running the risk of being declared ineligible for grant of mineral concessions.
The mining community may have to take a further hit on their profit margins if the mines ministry has its way.
After securing the Group of Ministers (GoM) approval on mandating mining companies to share 26 per cent of their net profits with people displaced by their projects, the ministry has now sought the GoM’s approval to empower mineral-rich states to levy a cess of up to 10 per cent on minerals extracted in their territorial domain.
In its revised version of the Draft Mines and Minerals (Development & Regulation) Bill, 2010, the ministry has added a clause stating that “the state government, may by notification specify, that there shall be levied and collected a cess on major or minor minerals extracted at a rate not exceeding 10 per cent of the royalty in a manner prescribed by the state government. Provided that the cess shall not be increased more than once during five years.”
The GoM, comprising 10 union ministers and headed by finance minister Pranab Mukherjee, will deliberate these proposed provisions in its meeting. Deliberations on the Bill are understood to have reached their last leg and, after approval of the GoM, would be taken to the Cabinet. Meanwhile, the Planning Commission has asked the GoM to consider — besides the 26 per cent profit sharing formula-imposing a 5 per cent cess on royalty accruals “exclusively for paying compensation to the affected populace till the miner began paying royalty.”
On the proposed 26 per cent profit-sharing mechanism, the Commission, had earlier argued that it may not be the ideal way, as mining companies might declare less profits/no profits or losses.
Moreover, mining being a location specific activity, some affected persons might get more compensation than others, it had contended. So, the Panel suggested, an amount equivalent to say 26 per cent of royalty accruals be charged from mining firms instead of profit sharing and allotment of equity shares, and the money be earmarked for contribution to the state’s special fund for distribution to affected persons.
Signifying its determination to clamp down on exports of mineral ore, the ministry has inserted a provision in the revised Bill that every person “using or trading in or exporting major minerals register himself with the state government”.
It has also specified that the Centre may notify a cess on major minerals “as a duty of customs, where the ore is exported and the rate shall not be increased more than once in five years.”
Regarding the proposal mandating miners to share their net profits, mines minister BK Handique had suggested that they pay 26 per cent of their net profits for the previous financial year from mining related operations, which was unanimously endorsed by the GoM.
According to the revised Bill, “where the holder of the mining lease is a company, it shall allot at least one share at par for consideration other than cash to each person of the family affected by mining related operations and such shares shall be non-transferable”.
It says that the Articles of Association of the firm referred to in the Bill’s sub-section-III shall contain articles to allot shares in accordance with the provisions.
Companies holding mining leases have been mandated to provide employment and other assistance “in accordance with the Rehabilitation and Resettlement Policy of the concerned state government”, according to the Bill.
Eager to ensure compliance to this provision, the Bill mandates that the companies failing to adhere to the stipulated provisions might have to forfeit their security deposits besides running the risk of being declared ineligible for grant of mineral concessions.
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