A move that would benefit mineral-rich states significantly, the Cabinet Committee on Economic Affairs (CCEA) is likely to consider a new royalty regime for coal and lignite on Thursday.
Royalty for coal and lignite has been proposed to be shifted to an ad-valorem rate of 14% and 6%, respectively, excluding taxes and other levies, sources said.
Currently, the royalty for both the minerals is calculated through a formula consisting of ad-valorem plus a fixed component.
While the fixed component depends on the grade of coal, ad-valorem rate is calculated at basic pit-head price and has been fixed at 5% of the invoice price, excluding taxes and other levies.
The proposal to shift to the new regime has already been approved by the finance ministry and the Planning Commission, and will be applicable for both state-owned and private sector miners, including captive coal producers, sources added.
Royalty rates for both coal and lignite have not been revised since August, 2007.
The move, if approved, is likely to have a chain reaction as it would make coal costlier and may lead to increase in electricity tariffs.
Mineral-rich states, including Odisha, Jharkhand, Chhattisgarh, Andhra Pradesh, Tamil Nadu and Madhya Pradesh, have been seeking the shift for long to ad-valorem-based royalty regime.
The state governments have contended in past that rupee has depreciated substantially since the last revision.
According to them, coal firms have revised prices frequently and since royalty rates are fixed on tonnage basis, the states are not getting the benefits of higher prices.