The Hindu Business Line : Decision on revised royalty for coal, lignite likely today

New Delhi June 20 Though consumers might have to pay more, the state governments could be in for a bonanza with the Cabinet Committee on Economic Affairs likely to take a decision at its meeting on Thursday on revising the royalty rates for coal and lignite. These rates were last revised more than three years ago.

Sources close to the development told Business Line that various states have made a strong case for fixing the royalty rates on an ad valorem basis. But the Prime Minister's Economic Advisory Council, headed by Dr C Rangarajan, has looked into the issue and suggested a combination of specific royalty and ad valorem royalty based on the price.

The Coal Ministry has also made a proposal for complete switchover to ad valorem rates ranging between 15 and 20 per cent.

Once the royalty rate is notified, it would be up to the coal mining companies to decide if they would absorb the burden or pass it on to customers.

The matter also came up during the last winter session of Parliament when Union Minister of State for Coal, Mr Dasari Narayana Rao, informed the House that the royalty on coal and lignite would be revised.

Revenue source

Acknowledging that royalty from coal and other minerals was an important source of revenue for the mineral-producing states, the Minister had drawn the attention of the House to the recommendations of the Economic Advisory Council to the Prime Minister to which the matter was referred after the Twelfth Finance Commission suggested that the rates of royalty be fixed on an ad valorem basis.

Earlier, the CCEA in 2004 had approved the revised rates of royalty on minerals as also the rates of dead rent. As a result, total royalty accruing to the 22 major mineral bearing states went up by over 11 per cent to Rs 960.30 crore from Rs 863.90 crore.

The major beneficiaries of the Rs 96-crore increase in royalty were states such as Andhra Pradesh, Chhattisgarh, Gujarat, Jharkhand, Karnataka, Madhya Pradesh, Maharashtra, Orissa, Rajasthan and Tamil Nadu.