The Minister of State for Coal Shri D. Narayana Rao informed the Lok Sabha today that Government is at an advance stage of considering revision in rate of royalty on coal. Responding to the Members of Parliament during a Calling Attention on the issue, he said, "Though it would not be possible to give a definite time frame, the decision may take about 3-4 months". Shri Rao also mentioned that the present Government has taken important steps in connection with demand of coal producing states to increase royalty. A Committee under the Chairmanship
of Additional Secretary in the Ministry was appointed. Considering complexities of the matter, the issue was examined by the Economic Advisory Council of the Prime Minister which has recommended fixation of royalty on the basis of a mixed formula of ad valoram and tonnage based fixed rates. Shri Rao emphasized that more than 85% of the coal is used for power generation hence the rate of royalty has a bearing on the cost of power supplied to the people.
This issue was also discussed in a meeting on 10/10/2006, chaired by Secretary (Coal) with the
representatives of the Coal producing states. The Finance Minister Shri P. Chidambaram also ntervened saying that the EAC has stated that the rate of royalty should take care of both producer and consumer as main consumer of coal is the power sector including NTPC
He added that the EAC has further recommended that rate of royalty should not be applicable automatically but should be adjusted from the local cess levied by State Governments.
Following is the text of Statement made by the Minister of State for Coal Shri D. Narayana Rao in response to the calling attention motion tabled in the Lok Sabha by Shri Braja Kishore Tripathy, Shri Prasanna Acharya and Shri Basudev Acharia :-
"I wish to inform the august House that Section 9(3) of the Mines and Minerals (Regulation & Development) Act, 1957 empowers the Central Government to enhance or reduce the royalty rates in respect of coal and lignite. The proviso to the aforesaid Section prevents the Central Government from enhancing the rate of royalty on coal and lignite more than once during any period of three years. Thus, it may be seen that it is not stipulated under law to revise the rate of royalty on coal and lignite after every three years. However, the rates of royalty are revised after taking into consideration the interests of all stake holders and the overall economic scenario of the Country.
2. The Central Government recognizes the fact that royalty from coal and other minerals constitutes an important source of revenue for the concerned State Governments. A mineral is a non-replenishable resource
and once it is extracted and consumed, its economic value gets extinguished forever. Therefore, the States demand to be compensated adequately by way of royalty.
3. The royalty rates on coal and lignite were last revised on 16.08.2002 and 15.03.2001 respectively. Royalty on lignite was fixed at Rs. 50/- per tonne and the rates fixed on coal ranged from Rs. 65/- to Rs. 250/- per tonne, depending on the grade of coal. At the time of last revision of royalty rates in respect of coal, the rates were about 16% of the average price of coal. Thus, the rates fixed were quite reasonable and compared quite favourably with the international trends in regard to royalty on coal.
4. The Twelfth Finance Commission (2005) recommended that 'since royalty is an important source of revenue for some of the states, the rates of royalty should be fixed on an ad valorem basis.'
5. While appreciating the suggestions made by various coal producing States as well as by many Hon'ble Members of Parliament for early revision of royalty rates on coal and lignite, Ministry of Coal constituted a Committee under the Chairmanship of the Additional Secretary, Ministry of Coal on 02.06.2005 to examine the issue of revision of royalty rates on coal and lignite. The Committee held extensive deliberations on the issues involved and also held consultations with all the stakeholders, which included both coal producing as well as consuming States, the concerned Ministries/Departments/Organisations of the Central Government, the
major industry associations such as FICCI, Cement Manufacturers
Association, Federation of Indian Mining Industries (FIMI) etc. and the
coal companies.
6. In view of the complexities involved, the Government decided that the
issue of payment of royalty on coal on ad valorem basis vs tonnage basis
may be examined by the Economic Advisory Council to the Prime Minister
(EAC to PM). The EAC to PM has recommended that the royalty may be
shifted from specific levy to a combination of specific and ad valorem
levies. EAC felt that this arrangement will provide a certain minimum
royalty under the specific component plus a share in the price as a
variable component. The royalty on coal has to be determined so as to
take care in a balanced way of the interests of both the producers and the
consumers. EAC further observed that our royalty rates are already high
relative to those in other countries. This should be kept in view in
fixing the royalty rates. A revision in royalty should not be made
applicable automatically to states which levy own cesses. The royalty to
be allowed to such states should be adjusted for the local cesses so as to
limit the overall revenue to the formula based yield.
7. The Committee constituted by the Ministry of Coal submitted its
report on 14.07.2006 after having detailed deliberations with all stake
holders. The recommendations made by the Committee are at an advanced
stage of consideration in the Government.
8. It is observed that in the wake of the judgment passed by the
Constitutional Bench of the Supreme Court in Kesoram Industries Ltd. Vs
Government of West Bengal upholding the legislative competence of the
State legislatures to levy cess on mineral bearing lands, a number of
States have reintroduced cess or other statutory levies on mineral
bearing lands. The rates vary from Rs.20/- per tonne in Andhra Pradesh
to 25% ad valorem in West Bengal. Incidence of cess levied by State
Governments together with the enhanced royalty rates would have a
cascading effect on the coal consuming sectors and this would cause
disparities
across the States.
9. This issue was further discussed in a meeting under the Chairmanship
of Secretary (Coal) held on 10.10.2006 with the representatives of the
coal producing States. The views of the State Governments on the matter
have been obtained.
10. Based on the report of the Committee on royalty and the consultation
held with the State Governments, the matter would soon be placed before
the Cabinet Committee on Economic Affairs for a decision. May I assure
the Hon'ble Members that interests of all the stakeholders would be taken
into account while deciding on the revision of royalty rates in respect of
coal and lignite.
11. In so far as other minerals are concerned, the rates of royalty of
minerals other than fuel and minor minerals were last revised on
14.10.2004 and no revision of royalty rates would be possible before
13.10.2007 for these minerals. At present, ad valorem regime has been
adopted in respect of as many as 39 minerals.
12. Ministry of Mines has already constituted a Study Group under the
chairmanship of Additional Secretary, Ministry of Mines for next revision
of royalty rates on major minerals (other than coal, lignite and sand for
stowing)."
RCJ/UB
(Release ID :22844)