This dramatically changes what locals will get if the proposal becomes law. For example, for a tonne of iron ore which costs about Rs 8,000 today, royalty paid is 10 per cent or about Rs 800. But net profit for a miner could be as high as Rs 7,000.
In a note to Finance Minister Pranab Mukherjee, who chairs the Group of Ministers (GoM) set up to vet the draft Mines and Minerals (Development & Regulation) Bill 2010, Mines Minister Dinsha Patel has argued that calculating profits earned by various mining companies was a difficult exercise “and accounts could be fudged to hide the annual profit”.
Similarly, it could also be difficult to ascertain profits of those steel companies which have captive mines. “There is also a possibility of the state diverting funds meant for mineral-rich districts to other parts of the state.. So, I feel that we can have an arrangement of industry sharing an amount equal to 26 per cent of royalty paid in previous year. The royalty percentage shared can be reviewed by the National Mining Regulatory Authority (NMRA) every three years,” Patel has written to Mukherjee.
Patel’s predecessor B K Handique had pushed for 26 per cent profit-sharing to “promote inclusivity” in mining zones.
Planning Commission Deputy Chairman Montek Singh Ahluwalia too had raised a red flag on Handique’s proposal, stating it would discourage investment and even prompt similar demands from other sectors. The Federation of Indian Mineral Industries, the leading trade body, said the profit-sharing mechanism would scare away exploration and mining companies. CII and FICCI said it would put a very high economic burden on mining companies and make their operations unviable.