Value-based royalty boosts mineral revenue of States

Vishwanath Kulkarni New Delhi | Updated on April 15, 2011


Gujarat's royalty revenue from minerals has gone up from Rs 250 crore in 2009-10 to Rs 420 crore in 2010-11 (April-December), according to the Indian Bureau of Mines.

Other States too have been collecting more royalty on major minerals for the last two years. This does not include royalty from minerals such as coal and lignite.

The increase in receipts is mainly due to the shift in method of collection from tonnage basis to ad valorem or based on the market value of the mineral. States shifted to collecting royalties on ad valorem basis in 2009-10. A broad uptrend in prices across mineral categories also aided higher receipts.

Besides Gujarat, Maharashtra has also exceeded the previous year's receipts in the first nine months of 2010-11.

Andhra Pradesh, Chhattisgarh, Goa and Rajasthan could exceed or match the royalty they collected in the previous year. However, key iron ore producers such as Karnataka, Orissa and Jharkhand could buck the trend in revenue receipts, if one goes by the numbers reported by these States to the Indian Bureau of Mines.

In the case of Karnataka, the ban on iron ore exports for a major part of the year, to curb illegal mining, has impacted the accruals. Karnataka in its Mid-Term Fiscal Plan for 2011-15 admitted that revenue mobilisation was impacted due to the ban on iron ore exports.

The monthly collections, which were nearly Rs 100 crore a month before the ban in July 2010, were reduced to Rs 75 crore after the ban.

Similarly, the tough measures taken by Orissa to curb illegal mining in the State could have also impacted the royalty receipts.

Despite the increasing trend in royalty collections, the States have demanded that royalty rate needs to be made ad valorem for all minerals and be raised to at least 20 per cent of the value. Royalty on minerals such as iron ore, quartz, silica and sand are charged on ad valorem basis.

However, minerals such as limestone and dolomite still attract royalty on tonnage basis.

Published on April 15, 2011

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