The Economic Advisory Council (EAC) to the Prime Minister has recommended that any revision in royalty on coal should not be made applicable automatically to the states levying cesses. West Bengal is one of the states that levies 25 per cent cess on coal.
Minister of state for coal, Dasari Narayan Rao, said in Lok Sabha on Tuesday that EAC has further recommended that royalty to these states should be adjusted for local cess so as to limit the overall revenue to the formula based yield.
The EAC has also recommended that the royalty may be shifted from specific levy to a combination of specific and ad valorem levies, he said, in a statement on a calling attention motion by Braja Kishore Tripathy of BJD and two others.
This, the EAC felt will provide a certain minimum royalty under the specific component plus a share in the price as a variable component.
Noting that the royalty rates on coal were already high as compared to those in other countries, the EAC said this should be kept in view while fixing royalty in future.
Rao contended that the 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. “In 90 per cent cases the consumer is power generating companies and any increase in royalties will have an impact on the final price of the electricity,” he said.
Finance Minister P Chidambaran, who intervened in the discussion, said the decision on EAC recommendations would be made at the earliest in Cabinet Committee on Economic Affairs.
Rao assured that that interests of all the stakeholders would be taken into account while deciding on the revision of royalty rates of coal and lignite.
Royalty rates on other minerals (barring fuel and minor ones) were last revised in October, 2004 and hence no revision would be possible till October next year, the minister said. “The royalty of 16 per cent of the average price of coal is quite reasonable and comparable with international trends,” he said.
At present, ad valorem regime has been adopted in respect of as many as 39 minerals.
He said the Mines ministry has constituted a study group under the chairmanship of Additional Secretary to consider the next revision of royalty rates on major minerals (other than coal, lignite and sand for stowing).