India’s Mines Ministry is planning to do away with double calculation of royalty — a complaint that miners in the country have been raising for quite some time now. The ministry is proposing that the average sale price be calculated after deducting the additional payments made to the District Mineral Foundation (DMF) and others as royalty.
Royalty on minerals, currently payable on ad valorem (according to value) basis, is calculated on the basis of the average sale price (ASP) published by the Indian Bureau of Mines. ASP is also used in calculating auction parameters such as premium, upfront payment, reserve price for bidding, security deposits and so on.
The ASP now includes royalty and payments to statutory bodies like DMF and National Mineral Exploration Trust (NMET). For the purpose of computing the sale value, no deduction is made in the royalty payment to these statutory bodies.
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The Ministry is proposing to do away with this old system of calculation, and make necessary amendments in the Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession Rules, 2016 (MCR 2016), too.
‘Additional charge on miners’
As per a committee report — set up under the Chairmanship of retired bureaucrat, Praveen Kumar — the sale value of minerals already includes royalty, payments to DMF and NMET. But, the lessee (of the mines) ends up paying “royalty on royalty”, it held; pointing out that due to this there is an “additional charge on the miners”.
The committee — which had members of Mines and Steel Ministries, NITI Aayog, Indian Statistical Institute and Indian Bureau of Mines — has recommended “calculating ASP after deducting royalty, DMF and NMET.
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Amendment to concession rules
The charging of royalty, DMF, NMET and auction premium on the sale value which includes these charges “is not the appropriate way to collect revenue and leads to cascading effect on both royalty and auction premium”, the Ministry said in a notice; adding that it is accordingly “considering to amend MCR 2016”.
Under the proposed amendment, “average sale price to be used for calculation of the payment of royalty, payment towards DMF and NMET... shall be the average sale price of the mineral grade or concentrate published by the Indian Bureau of Mines for the relevant mines, minus the royalty, payment towards DMF and NMET calculated on sale price published by IBM”.
The Ministry has sought stakeholders comments by July 3.