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Top industry bodies demand royalty cut on non-ferrous minerals

KOLKATA: Top industry bodies have urged the government to lower royalty rates on non-ferrous minerals like zinc and lead, in line with global rates. These recommendations have been made by leading chambers of commerce like Ficci, Assocham and CII, all part of a Study Group constituted by the government to recommend new rates of royalty, along with the Federation of Indian Mineral Industries ( FIMI) and governments of mineral-rich states. Royalty rates on minerals are decided by the government and normally come up for revision every three years.

The current royalty rate on zinc and lead is 8.4% and 12% respectively and the government is believed to be considering a further rise in the rates. Incidentally, royalty rates on zinc and lead have been raised from their respective levels of 3.5% and 4%, back in 1997. The latest meeting of the Study Group was held in the second week of May and it is expected to finalise its recommendations to the government by June this year.

As part of its proposals, Assocham has written to the special secretary to the union ministry of mines Gauri Kumar saying that any further increase in royalty rates on the two minerals will adversely affect the domestic zinc and lead mining industry. Ficci has also given it a similar recommendation keeping in mind the Mines and Minerals (Development & Regulation) Bill (MMDR Bill) which is now in Parliament.

"Our views were sought on the draft report of the Study Group and we have already given it in writing after speaking to our members," a Ficci official said.

In particular, there is a proposal in the MMDR Bill where industry will have to deposit equal amount of royalty to a district mineral fund (DMF). With increase in present royalty rates and the implication of a DMF, the total tax burden is likely to make existing operations unviable. "Royalty on zinc and lead should not be more than 5% of LME on an ad valorem basis so that when the new MMDR Bill comes into force, the total implication, including royalty and DMF, will be a maximum of 10%," Assocham said in its letter to the mines ministry.

"Mineral royalty rates in India are among the highest in the world. Globally, the rates vary from 2.5% to 5% in countries like Australia, China, Chile, South Africa, Argentina, Poland and Mexico, among other countries. Moreover, the government does not given any incentive for value addition by way of beneficiation of ore and smelting. Mines are going deeper and deeper every year which is resulting in increase in cost of production. In the past three years, mining cost has increased significantly thus reducing profit margins," Assocham said in its letter to the mines ministry.