K'taka loses Rs 150 cr as Centre delays mineral royalty revision

The Centre's dilly-dallying in revising the royalty rates for minerals has cost the Karnataka exchequer around Rs 150 crore in the present fiscal.

The state, which is rich in mineral resources, had expected Rs 600 crore revenue from royalty on major and minor minerals in 2007-08. However, the actual realisation is now pegged at Rs 450 crore.

The shortfall in revenue has been discussed in the Medium Term Fiscal Plan for Karnataka (2008-12) that was tabled in the Parliament.

Perturbed by the shortfall, the Karnataka government has resolved to mount pressure on the Centre to expedite revision of the royalty rates.

Speaking to Business Standard, director of mines and geology K S Prabhakar said: "The Centre was supposed to revise the royalty rates on major minerals in January 2007. Subsequently, it deferred the revision date to October 2007. Since then, we have submitted several representations seeking revision, but nothing has happened so far. As a result, we continue to get pittance as royalty."

Karnataka, which is estimated to have over 40,000 sq km of green stone belt, is known for iron-ore, chromite and manganese deposits.

Of the 160 million tonnes of iron-ore that was produced in the country in 2006-07, Karnataka's share was 34 million tonnes. Nearly, 28 million tonnes of iron ore from the state were exported.

Prabhakar said: "While the mine owners are making huge sums by cashing in on the export market that has been booming for the last five years, the royalty being paid to the state is very low. While the mine owners make a profit of Rs 4,000 per tonne of iron ore, the royalty paid to the state is a meagre Rs 27. In the case of fines, the royalty rate fixed is Rs 17 per tonne."

If the royalty rates are revised, the state government hopes to rake in an additional Rs 250 crore from major minerals.

In fact, the 2007-08 budget presented by the then deputy chief minister B S Yeddyurappa had pressed the alarm bell when it pointed out: "Although the mining sector is witnessing an unprecedented boom, revenues in proportion to the growth are not flowing to the state as royalty rates are fixed at low rates whereas the value of minerals has increased manifold."

Later, the then chief minister H D Kumaraswamy took up the issue with the Centre and demanded that it calculate royalty on the basis of the value of the minerals and not the weight as being practised presently.

The royalty on minerals should be aligned with their global selling price, he had contended.

The state government claimed that it was getting a royalty of Rs 80 crore per year from the iron-ore sector in the state while the damage caused to the roads by trucks transporting ore was around Rs 1,200 crore per annum.

The Centre responded with an assurance to Karnataka and other mineral producing states like Orissa and Chattisgarh that it will fix royalty on an ad-valorem basis (where the duty is determined according to the market value of the commodity) instead of the tonnage basis.

However, there has been no concrete action on this front. State government officials, who did not want to be identified, attributed the Centre's delay in revising royalty rates to the pressure mounted by the mining lobby.

However, they hoped the revision to come into effect by the end of 2008.