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Government approves hike in royalty rates for minerals

21 Aug 2014 Evaluate

In not so positive development for steel companies, the government approved increasing royalty rates on minerals including iron ore and bauxite, in a long-awaited move that will significantly increase the annual revenue of states. The revision in mineral royalty rate, which includes 55 items, but excludes coal, lignite and sand for stowing, was based on the recommendations of a 17-member study panel set up by the UPA-II regime in 2011. Previous government too had agreed to hike the royalty, but the process had got stuck due to inter-ministerial differences. The government sees the hike as crucial in bridging the deficit in Centre-state relations.

The rates of royalty, revised in every three years, for major minerals excluding coal, lignite and sand for stowing were last revised in August, 2009. They are charged on ad valorem basis, depending on increase/decrease in mineral prices.

The Cabinet, chaired by Prime Minister Narendra Modi, approved hiking the royalty for major minerals like iron ore to 15%. The proposal before the Cabinet was also to hike the rate of phosphates to 12.5% from 11 per cent, metallurgical bauxite to 0.6% from 0.5% and lead from 1.7% to 14.5%.

As per some estimates, annual revenue collection of mineral-bearing states could swell over 40% to around Rs 15,000 crore. Meanwhile, Chhattisgarh, Odisha, Jharkhand, Karnataka and Goa were among the 11 mineral-rich states.

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