Mines bill levies 12.5% cess

Thought bad news is over for miners with the 26% profit share and 100% royalty blows?

Not so fast. A group of ministers on the new Mines and Minerals (Development & Regulation) Bill, 2010 (MMDR) has also approved levy of 2.5% central cess and 10% state cess on amount of royalty paid by companies.

“The issue of levying cess was acceptable to all,” said a Cabinet minister, who was part of the group set up on the Bill, referring to the other fellow ministers on the panel. He did not wish to be named.

The cess was proposed to strengthen mining directorates across the states. The proceeds, which will be routed through the National Mineral Fund and State Mineral Fund would be used to promote scientific management of mining and mine closure, local development and preventing illegal mining among others, sources said.

The group of ministers at its July 7 meeting had also proposed that non-coal mining companies should pay an amount equal to the royalty they pay states — or 100% royalty — to people affected by a project.

For coal mining companies, it proposed a 26% share of net profit to the affected people.

The draft Bill will now go to the Cabinet for clearance, where there could be some changes.

Centre adds double cess to royalty blow for miners Bijal Shah, Gopal Ritolia and Akash Chattopadhyay of IIFL, the broking house, said, “in its current form, implementation of this bill could reduce Coal India’s earnings by 15% while impact on metal companies would range from 2% to 9%.”

The original MMRD Bill, they said in a note on July 8, as compensation for people affected by mining, had suggested -
1) for new mines, the lessee should allot 26% free shares in the company to the local populace and
2) in case of existing mines, an annuity equal to 26% of the profits should be paid out to the local community.

“The new approved draft makes a distinction between companies mining coal and other minerals,” they said. The Bill will now be sent to the Union Cabinet for approval over the next 2-3 weeks. That could mean it could be tabled in the monsoon session of the Parliament, which is slated to begin from August 1.

The Bill is expected to sail through considering that it’s a ‘pro-poor’ bill. “But if the bill is referred to the Standing Committee, it would at most delay the bill till the winter session that is likely to commence in December,” Shah, Ritolia & Chattopadhyay said.