Having committed a huge premium on iron ore mines auctioned, steel companies and other merchant miners have upped the ante against levy of royalty-on-royalty due to an anomaly in calculation by the Indian Bureau of Mines (IBM).
Unlike in coal, Indian Bureau of Mines fixes the price of iron ore and other minerals monthly for royalty calculation based on the prices declared by merchant miners in their returns.
The average sales price declared by the Indian Bureau of Mines includes royalty (15 per cent on base price), District Mineral Fund (10 per cent of royalty) and National Mineral Exploration Trust (2 per cent of royalty) thus the price of minerals for each subsequent month gets inflated to that extent.
In the case of coal, the royalty is calculated based the pit-head cost announced by Coal India.
In a representation to the Ministry of Mines, industry body Confederation of Indian Industry has claimed that there has been a double taxation in respect of charging of premium, royalty, contribution to DMF and NMET, leading to an overcharge of about 20 per cent on miners.
Excluding coal mines, the government has collected ₹93,362 crore by way of royalty, DMF and NMET last fiscal and an over charge of 20 per cent works out to ₹16,672 crore on miners.
The overcharge of royalty comes even as the exchequer collection has increased nearly 12 times to ₹93,362 crore against ₹7,507 crore logged in FY’19 as about 43 auctioned mines were in operation last fiscal against 19 mines in FY’19.
The Indian Bureau of Mines had justified the inequitable system of royalty by claiming that it is not a tax to be deducted from the “sale price” for computing royalty on the subsequent month, said a steel company official.
However, he added the rule 42(3) of MCR, 2016 states that the average sale price of any mineral is to be computed based on the weighted average price of the ex-mine used for non-captive purpose.
To remove this anomaly on royalty calculation and bring parity with Coal, the Ministry of Mines has to issue a clarificatory note letter to ensure the following of Rule 42 of MCR 1960 and Rule 45 of MCDR 2017 to correctly calculate ex-mine price by excluding all the cost incurred outside mine area such as Royalty, DMF, NEMT, Premium etc, said CII in its note.