The government may soon levy a 10 per cent royalty on iron ore on ad valorem basis as the mines ministry has sent a proposal in this regard to the Union Cabinet for its approval.
At present, iron ore carries a fixed royalty of up to Rs 27 a tonne, depending on its variety and grade. The proposal is to levy 10 per cent royalty on its prevailing market price.
Royalty is the amount paid by miners to the state government on the mineral content of the extracted ore.
"A levy of 10 per cent royalty on ad valorem basis on iron ore has been proposed. Royalty rates of some other minerals will also be linked to their selling prices. The proposal in this regard has been sent to the Cabinet for its approval," a top mines ministry official said.
Apart from iron ore, minerals like limestone, graphite and dolomite will see royalty rates being fixed at their market price on ad valorem basis, he added.
The practice of a market-price linked royalty is not new to the sector as the government charges a fixed percentage on the sale price of minerals like copper, zinc and lead, diamond and chromite on ad-valorem basis. A change in royalty rates of such minerals have also been proposed, he added.
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On copper, the royalty rate currently stands at 3.2 per cent of the prevailing London Metal Exchange (LME) prices, while on zinc and lead it is 6.6 per cent and 5 per cent, respectively.
Similarly, on diamond, the royalty stands at 10 per cent of sale price on the ad valorem basis.
The royalty rates on minerals are normally revised every three years. The last assessment was done in 2004, so a revision is due since 2007. The ministry has been working on the proposed changes in royalty for the last two years.
The Committee of Secretaries, which met in the first week of June to finalise the new royalty rates, is understood to have favoured the policy which was pushed forward by a high-powered study group.
The proposal for linking royalty on market price of iron ore and other minerals had found priority in the 100-day agenda of the Mines Ministry.
Mineral-rich states like Jharkhand and Chhattisgarh earn in the range of Rs 1,500-4,000 crore per annum from royalties.