Govt may hike royalty on iron ore,mop up Rs 2K crore

With the steel industry mounting pressure on the government to contain the export of iron ore,the Committee of Secretaries (CoS) is likely to consider an upward revision of royalty rates for iron ore,when it meets tomorrow. If done,then it would not only disincentivise ore export,but also enable the government mop up nearly Rs 2,000 crore.

The meeting to be chaired by Cabinet Secretary K M Chandrasekhar is also expected to deliberate extensively on the recommendations of the Hoda Committee and the report of an earlier high-powered committee in this connection. The government has lost money to the tune of nearly Rs 2,000 crore in the last fiscal by not revising the mineral royalty rates,especially that on iron ore. The CoS would discuss the issue at length and decide accordingly, official sources said. Interestingly,a CoS constituted by the last UPA government in its last tenure to delve into the issue had already recommended the imposition of 10 per cent ad-valorem royalty on iron ore. But the then union cabinet had put it on hold,arguing that the economy was witnessing inflationary pressures and as such the same may be put on hold.

Justifying the need for hiking the royalty rates,Mines Ministry sources pointed out that iron ore prices have shot up from 30 dollars to 150 dollars per tonne during the past three years,while the royalty rates hovered around Rs 27,thereby making the incidence of royalty negligible. The government being the rightful owner of natural resources is not getting the benefit of increase in the valuation of iron ore, they reasoned. The miners,who would be badly hit if this happened,are upset. If the royalty is hiked,production would be hit and prices would soar. It would be to the benefit of none, Federation of Indian Mineral Industries (FIMI) secretary general R K Sharma contended.