The Hindu Business Line : Govt approves 14% hike in royalty on coal, lignite

New Delhi June 21 Giving in to the long-pending demand from coal-producing States, the Cabinet Committee on Economic Affairs (CCEA) on Thursday approved an increase in royalty rates on coal and lignite by an average 14 per cent.

The approval is likely to give coal-producing States a reasonable share of the income earned by production and selling of non-renewable mineral resources.

Speaking to newspersons after the CCEA meeting, Finance Minister Mr P. Chidambaram said: "The increase in revenue for the States, barring West Bengal, will be 24 per cent for coal and 27 per cent for lignite. The revenues of the coal-producing states would increase to Rs 3,718 crore from Rs 3,000 crore now."

The rates as of August 2002 varied between 13 per cent and 20 per cent; these would now go up to 15 per cent and 31 per cent.

The decision to revise royalty was taken after the Economic Advisory Council (EAC) to the Prime Minister and a Study Group of the Ministry of Coal considered the principles of determining rates.

The Finance Minister also said that since royalty on coal had not been revised since 2002, States had been seeking enhancement in the rates.

"It is contended by States that while coal companies have been revising the prices frequently and since the royalty rates are fixed on tonnage basis, the benefit of higher prices has not been shared with the producing States. Consequently, the share of royalty as a percentage of coal prices has declined."

While both industrial and domestic consumers will have to shell out more for electricity following the hike in the royalty charges, the increase in consumer power tariffs is likely to be marginal.

"It is too early to predict the impact on tariffs since rates vary across categories of coal," an NTPC official said.

"But the overall impact on tariffs is expected to be marginal and likely to be only about one-two paise per unit on an average."

While the thermal power sector accounts for the largest portion of offtake of raw coal (about 78 per cent), the steel industry accounts for over six per cent and cement for over three per cent.

Currently, there are six specific royalty rates that are linked to the quality of coal; they range between Rs 250 per tonne for grade I and Rs 65 for grade V. The royalty for Andhra Pradesh is fixed separately.

Reacting to the decision, the CII said that the step would add to the burden on industrial and domestic electricity consumers.

The chamber also urged the State Governments not to levy any additional cess on produced coal.