Mines Ministry seeks to do away with royalty-on-royalty charges, proposes changes in rules

Mines Ministry seeks to do away with royalty-on-royalty charges, proposes changes in rules

Subject :Schemes

Context: The ministry is proposing that the average sale price be calculated after deducting the additional payments made to the District Mineral Foundation and others as royalty.

Details:

• India’s Mines Ministry is planning to do away with double calculation of royalty — a complaint that miners in the country have been raising for quite some time now.
• The ministry is proposing that the average sale price be calculated after deducting the additional payments made to the District Mineral Foundation (DMF) and others as royalty.
• Royalty on minerals, currently payable on ad valorem(according to value) basis, is calculated on the basis of the average sale price (ASP) published by the Indian Bureau of Mines.
• ASP is also used in calculating auction parameters such as premium, upfront payment, reserve price for bidding, security deposits and so on.
• The ASP now includes royalty and payments to statutory bodies like DMF and National Mineral Exploration Trust (NMET). For the purpose of computing the sale value, no deduction is made in the royalty payment to these statutory bodies.
• The Ministry is proposing to do away with this old system of calculation, and make necessary amendments in the Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession Rules, 2016 (MCR 2016), too.

Why this move?

• As per a committee report — set up under the Chairmanship of Praveen Kumar — the sale value of minerals already includes royalty, payments to DMF and NMET. But, the lessee (of the mines) ends up paying “royalty on royalty”. Thus there is an “additional charge on the miners”.
• The committee — which had members of Mines and Steel Ministries, NITI Aayog, Indian Statistical Institute and Indian Bureau of Mines — has recommended “calculating ASP after deducting royalty, DMF and NMET.

Amendment to concession rules

• The charging of royalty, DMF, NMET and auction premium on the sale value which includes these charges “is not the appropriate way to collect revenue and leads to cascading effect on both royalty and auction premium”, the Ministry said in a notice; adding that it is accordingly “considering to amend MCR 2016”.
• Under the proposed amendment, “average sale price to be used for calculation of the payment of royalty, payment towards DMF and NMET… shall be the average sale price of the mineral grade or concentrate published by the Indian Bureau of Mines for the relevant mines, minus the royalty, payment towards DMF and NMET calculated on sale price published by IBM”.

District Mineral Fund

• DMFs were instituted under the Mines and Minerals (Development and Regulation) (MMDR) Amendment Act 2015.
• They are non-profit trusts to work for the interest and benefit of persons and areas affected by mining-related operations.
• Objective: To work for the interest of the benefit of the persons and areas affected mining related operations in such manner as may be prescribed by the State Government.
• Jurisdiction: Its manner of operation comes under the jurisdiction of the relevant State Government.
• The fund is collected at the district level(District Mineral Fund) .There are certain high-priority areas identified in all states’ DMF rules, where at least 60 per cent of the fund must be used. These include vital and pressing concerns, including healthcare.
• The various state DMF rules and the Pradhan Mantri Khanij Khestra Kalyan Yojana (PMKKKY) guidelines stipulate some “high priority” issues for DMFs
• They are, drinking water, health, women and child welfare, education, livelihood and skill development, welfare of aged and disabled, sanitation.

Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY):

• The programme is meant to provide for the welfare of areas and people affected by mining related operations, using the funds generated by District Mineral Foundations (DMFs).

Objectives of the scheme:

• To implement various developmental and welfare projects/programs in mining affected areas that complement the existing ongoing schemes/projects of State and Central Government.
• To minimize/mitigate the adverse impacts, during and after mining, on the environment, health and socio-economics of people in mining districts.
• To ensure long-term sustainable livelihoods for the affected people in mining areas.