14 pc hike in royalty on coal, lignite; outgo at Rs 3,848 cr

By Staff
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New Delhi, June 21 (UNI) In a move that would fuel inflation, the Centre today raised the royalty on coal and lignite by 14 per cent, benefitting the states by about Rs 746 crore a year.

At present, coal and lignite producing states are getting a total royalty of about Rs 3,102 crore and this is estimated to go up to Rs 3,848 crore, depending upon production and grades, Finance Minister P Chidambaram told reporters.

Admitting that the hike would have a cascading effect on prices and inflation, Mr Chidambaram said the royalty revision had become inevitable as the Centre had made a commitment to the states which were demanding for a substantial increase for a long time.

While the royalty for coal producing states would go up from Rs 3,000 crore to Rs 3,718 crore, the royalty for lignite, mainly Tamil Nadu, would be up from Rs 102 crore to Rs 130 crore.

The revision was approved at a meeting of the Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Manmohan Singh.

The rates were revised in 2002 and the Centre was bound to review it every three years.

At present, the royalty as percentage of price varied from 13 to 20 and the new rates would vary between 15 per cent and 31 per cent.

In revenue terms, the states would get 24 per cent more for coal and 27 per cent for lignite, Mr Chidambaram said.

The royalty would be arrived at on the basis of fixed rate and ad valorem rate. While the fixed rate would be Rs 55 a tonne for the lowest grade and Rs 180 for the highest. The ad valorem component would be five per cent of the cost of coal or lignite.

The revision was approved on the basis of the recommendations of various groups, including the committee on royalty and the Economic Advisory Council of the Prime Minister.

It would be done by amending the second schedule of the Mines and Minerals (Development and Regulation) Act 1957.

The weighted average royalty payable after revision excluding West Bengal as a percentage of weighted coal price based on 2004-05 production level works out to about 14 per cent.

This will give coal producing states a reasonable share of income earned by production and selling of a non-renewable mineral resource like coal, Mr Chidambaram said.

The states were contending that while coal companies have been revising prices frequently and since royalty rates are fixed on tonnage basis, the benefit of higher prices has not been shared with states.

Consequently, the share of royalty as a percentage of coal prices has declined significantly.

UNI

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