The government’s intention to revise the royalty on coal is expected to fetch coal-producing states an additional revenue of more than Rs 710 crore per annum (based on the 2004-05 production).
The government will soon switch to a new mechanism of determining royalty through a combination of fixed and ad-valorem components, moving away from the tonnage-based mechanism. The royalty rates were last revised in 2002.
Andhra Pradesh, Jharkhand, Madhya Pradesh and Chhattisgarh will be the largest gainers from this move, cornering about Rs 500 crore in notional royalty earnings, according to sources in the ministry.
With the value of rupee depreciating substantially since the last revision in royalty rates, the ministry of coal has mooted a proposal for the revision to the Cabinet Committee of Economic Affairs.
The ministry has also contended that while the coal companies have been revising prices frequently and since the royalty rates are fixed on tonnage basis, the benefits of higher price has not been shared with coal-producing states.
The rates revision, which comes into effect only after the CCEA nod and subsequent amendment of the Second Schedule of the Mines and Minerals (development & Regulation Act 1957), may however hit coal-consuming sectors, primarily steel, cement and power. The revised royalty regime will add about Rs 65 per tonne to steel, 0.0149 per KW to power and about Rs 5.46 per tonne to cement.
Along with coal, the royalty for lignite will also be revised, yielding an additional revenue of about Rs 28 crore per annum for the states which will be an increase of nearly 29 per cent.