In an attempt to accommodate industry demands, the group of ministers on the new Mines and Minerals (Development & Regulation) Bill, 2010, (MMDR) on Thursday 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.

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Coal mining companies, on the other hand, should pay 26% of their net profit to the affected populace, the group said.

The move would impact the profit of Coal India, experts said, since it may have to cough up `5,000 crore under this formula.

The company posted a consolidated net profit of `10,907 crore in the last fiscal.

The proposal, though not final, will provide a major relief to non-coal mining companies (copper, bauxite, aluminium, iron ore, silver and gold etc), as the total money outgo for them will come down significantly according to the new formula.

This is likely to leave the Union Ministry of Moal and its minister Sriprakash Jaiswal unhappy: they wanted coal companies to pay an amount equal to royalty to those affected.

Interestingly, the agenda paper for the meeting of group of ministers had proposed 100% royalty sharing for non-coal companies. The agenda paper was reviewed by DNA Money.The 10-member group of ministers on the MMDR Bill, set up last June, met for the fourth time on Thursday.

At its previous three meetings, held when B K Handique was the minister, the group proposed all mining companies should be made to share 26% of their net profit with the affected people.However, after a cabinet reshuffle last year which saw Dinsha Patel taking over, the stance was changed.

A 26% share in net profit will rake in Rs18,000 crore annually, the ministry said.

Montek Singh Ahluwalia, deputy chairman of the Planning Commission, had also opposed the idea of 26% profit sharing saying such a move will discourage investment by the private players in the mining sector.

In a letter to finance minister Pranab Mukherjee, Ahluwalia said, “If we end up with too high a cumulative royalty burden compared with international standards, it will discourage future investments in the mining sector. We cannot assume that the additional burden can simply be passed on to the consumer, since these minerals are freely importable and users will switch to imports.”