A couple of days back, a report has appeared in the Wall street journal which asserts that, a royalty hike is on the cards for various minerals including iron ore, copper, zinc and lead. There are reports that there will be provision to charge royalty on bauxite too.
Now, in the context of a mineral-producing state like Orissa the iron-ore hike is of foremost importance. Orissa is the largest producer of bauxite in India; hence, this will be a decent revenue generator. The 2nd option does come with a few riders. More on that later.
I tried my best to get royalty figures for 2008-09. The official website lists it till 2007-08. Hence, I’m quoting the financial express reports to get a more recent figure. I will be happy to revise the same if someone can suggest more accurate figures to me.
Taking the FE figures, the royalty was 1340 crores for 2008-09. In fact, the target of 1250 crores was exceeded. Let us take the distribution. Coal supplied (at a minimum) about 700 odd crores of revenue from Talcher and sambalpur zones. Minor minerals were about 100 crores. Iron-ore among with chromium supplied about 300 odd crores.
Now, with a revision of royalty from 1 %( rs. 27) To say 10% the 300 odd crores would become at least 2000 crores. The figure would be higher but, since, chromium ratio/ data is not available as of now I cannot provide accurate figures.
Also, coming back to bauxite the scenario is tricky. Currently 0% royalty is charged on bauxite. The new proposal has 2 sections. Bauxite mined for alumina extraction or aluminium will have a royalty of 0.5%. Otherwise, it will be charged a royalty of 25%. In simpler terms bauxite mined by Vedanta for it’s smelter in lanjigarh will be charged 0.5%. Quoting a peak bauxite market price of $60 / tonne or Rs. 3000 INR, the royalties are an absolute bonanza. Also, one might note, that, direct, bauxite exports will be charged 25% but, mining for capacity building in the country will pay only 0.5%.
The amounts should be substantial here too.
So, looking at the above figures if one makes a new royalty calculation.
a)Coal -: The consumption can only increase with power situation worsening.
b)Iron-ore -: from 300 crores to 2000 crores.
c)Bauxite -: At least 100 crores can be obtained. (This is a very pessimistic estimate.
Totally, we can see a substantial improvement in the range of 2000 crores in the royalty revenue for the state. All in all, a very good bonanza for the state government. One might say, it is about time.
Now, in the context of a mineral-producing state like Orissa the iron-ore hike is of foremost importance. Orissa is the largest producer of bauxite in India; hence, this will be a decent revenue generator. The 2nd option does come with a few riders. More on that later.
I tried my best to get royalty figures for 2008-09. The official website lists it till 2007-08. Hence, I’m quoting the financial express reports to get a more recent figure. I will be happy to revise the same if someone can suggest more accurate figures to me.
Taking the FE figures, the royalty was 1340 crores for 2008-09. In fact, the target of 1250 crores was exceeded. Let us take the distribution. Coal supplied (at a minimum) about 700 odd crores of revenue from Talcher and sambalpur zones. Minor minerals were about 100 crores. Iron-ore among with chromium supplied about 300 odd crores.
Now, with a revision of royalty from 1 %( rs. 27) To say 10% the 300 odd crores would become at least 2000 crores. The figure would be higher but, since, chromium ratio/ data is not available as of now I cannot provide accurate figures.
Also, coming back to bauxite the scenario is tricky. Currently 0% royalty is charged on bauxite. The new proposal has 2 sections. Bauxite mined for alumina extraction or aluminium will have a royalty of 0.5%. Otherwise, it will be charged a royalty of 25%. In simpler terms bauxite mined by Vedanta for it’s smelter in lanjigarh will be charged 0.5%. Quoting a peak bauxite market price of $60 / tonne or Rs. 3000 INR, the royalties are an absolute bonanza. Also, one might note, that, direct, bauxite exports will be charged 25% but, mining for capacity building in the country will pay only 0.5%.
The amounts should be substantial here too.
So, looking at the above figures if one makes a new royalty calculation.
a)Coal -: The consumption can only increase with power situation worsening.
b)Iron-ore -: from 300 crores to 2000 crores.
c)Bauxite -: At least 100 crores can be obtained. (This is a very pessimistic estimate.
Totally, we can see a substantial improvement in the range of 2000 crores in the royalty revenue for the state. All in all, a very good bonanza for the state government. One might say, it is about time.
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