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Centre calls for comments from Odisha on iron ore royalty

The Centre has sought comments from Odisha on the anomaly in its levy of royalty charges on iron ore.

Odisha has been levying a flat royalty on iron ore -- be it a high grade lumps or the low grade fines, normally considered a waste. The flat levy of Rs 596 on average sale price in January corresponds to about 10 per cent of the maximum value of iron ore lumps of the highest quality.

Such uniform levy has inflated the costs for pellet and steel makers in the State. For example, the royalty on low grade fines exceeds the price of the ore itself. Fines containing less than 55 per cent iron ore content are priced at around Rs 500 a tonne.

Reacting to concerns raised by the Federation of Indian Mineral Industries (FIMI) and FICCI on this anomaly, the Mines Ministry has recently written to the Odisha Government seeking its comments by May 28. The Ministry said that Odisha's move to charge royalty “seems to be not in accordance with the Rule 64 B of the Mineral Concession Rules (MCR), 1960.” The rule states that royalty is to be charged based on the processed material, when processing is done within the lease boundary, and not at a flat rate corresponding to the highest quality of the lumps.

Though States own the mineral resources, the Indian Bureau of Mines under the Mines Ministry fixes the royalty charges, which are administered by the states. In the current royalty regime, iron ore attracts a 10 per cent levy on the value.

‘TOTALLY UNFAIR'

“It is totally unfair and not as per the law,” said Mr R.K. Sharma, Secretary-General, FIMI. Such a flat levy negates the Centre's move to incentivise and promote value addition to low grade ores through pelletisation.

Odisha has been charging flat royalty since September 2010.

The State had said that screening and crushing of extracted iron ore lumps into requisite sizes for sale and transportation, produces iron ore fines in the process. Since the value of the fines is less than that of the lumps, the process of screening and crushing results in a loss of royalty to the State Government, which may be recovered, it had argued.