Business Standard reported that iron ore miners are protesting alleged ambiguity in the government’s method for calculating the 10% ad valorem royalty notified on August 13th 2009.
Representatives of the industry met officials of the Indian Bureau of Mines recently in Nagpur and demanded that implementation of the new royalty scheme be kept in abeyance till a satisfactory clarity was agreed on.
Mr SBS Chouhan federation of Indian mineral industries advisor said that “The notification is silent on the type of iron ore on which the royalty is proposed. Whether it would be calculated on the basis of dry metric tonne, free on board or ex-mine, the notification does not reveal anything.”
Mr Chauhan said that they suggested IBM charge royalty on dry metric tonne, ex mine basis. If the price is ascertained on the current formula, the royalty would be almost 15 times more from the current levy of INR 27 per tonne.
He said that the thumbrule for calculating the royalty is the IBM benchmarked rates for each state every month, plus 20%. There has been no explanation for this 20% clause in the notification. If it is on tonnage basis, a majority of tiny and medium size mines would incur losses and have to close.
Mr Siddharth Rungta director of Rungta Mines Limited said that we are not averse to the royalty. But before implementing such an ambiguous notification, the government must come out with clarity on it. Otherwise, it will create havoc for the industry.
IBM officials have worked out a methodology with FOB as the benchmark price, minus transportation charges. The companies said that ex mine ore contains a huge amount of moisture, which dries over a period of time. This cost is being unfairly pushed on the miners.
The Cabinet Committee on Economic Affairs on July 31st 2009, approved the 10% ad valorem royalty rate on iron ore, besides hiking the levy on minerals like copper, zinc and lead. India exported 106 million tonnes of the total production of 223 million tonnes of iron ore in 2008 to 2009.
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