The mines ministry will
push for a new system of calculating royalties instead of the current
practice of basing it on an average price determined by the Indian Bureau
of Mines, ministry officials said.
Under the new method, pithead
prices, on which royalty is based, will be discovered from iron prices across
the supply chain.
The ministry says this proposal,
which is unlikely to raise royalty collections for states, will be taken up by
its study group later this week.
In its report on illegal mining in
Karnataka, the state Lokayukta had criticized the practice of using the
statewise average prices put out by the bureau, saying that it lead to lower
royalty collections. The Lokayukta had found that the bureau's weighted average
pitmouth value of ore, to be collected from the top 10 non-captive producers,
did not accurately reflect market price of iron ore.
An upward revision of royalty rates,
allowed once in three years and the next revision is only possible after August
2012. States collect a charge either on the tonnage as in the case of limestone
which is largely mined for captive use, or on an ad valorem basis. A royalty of
10% ad valorem is levied on iron ore at present.
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