Increase ore royalty rates
It's notable that Jindal Steel has reportedly bagged long-term mining rights in Bolivia’s El Mutun site, said to contain Latin America’s largest iron ore deposits. It would be the biggest contract for ore abroad, by an Indian steel producer since the reserves there could rival proven ferrous deposits in the whole of India. But while Indian companies win mining rights abroad the fact remains that there is a sorry lack of transparency when it comes to mining here at home. The investment regime for the high-growth potential mining sector remains mired in rigidities and glaring policy inflexibility, despite pious intentions of reform. Note that India’s estimated reserves of iron ore are amongst the largest anywhere. And yet, there is much opacity in the grant of licence for reconnaissance, prospecting or actual mining. Or, consider our royalty policy. The royalty rates remain rock solid and pegged at a paltry Rs 27 per tonne, never mind the sustained rally in iron ore prices. And that’s the going royalty rate for the highest quality ore, with Fe content of at least 65%, or more.
For lesser ore, the rate is a niggardly Rs 11/tonne! And this despite international iron ore prices going up from $33/T in 2003, to $61/T in ‘04, and likely to reach $85/T in ‘06. Domestic prices of finished metal are in any case linked to global prices. And yet, we do not have a policy for ad valorem royalty rates. Worse, the ‘specific’ rates remain unrevised for sustained lengths of time. Royalty revenues accruing to the states surely need to reflect international scarcity value of ore, since our annual iron ore output is but a small fraction of world production. Already, cash-strapped, mineral-rich states, in a desperate bid to boost revenue accruals, link mining rights to putting up steel mills which may be locationally quite unviable. Instead, we need reasonable royalty rates and policy clarity. As an avowedly globalising economy we need to scrap the last vestiges of autarky and unabashedly pitch for openness.
-- The Economic Times Editorial dated 3rd June' 06.
For lesser ore, the rate is a niggardly Rs 11/tonne! And this despite international iron ore prices going up from $33/T in 2003, to $61/T in ‘04, and likely to reach $85/T in ‘06. Domestic prices of finished metal are in any case linked to global prices. And yet, we do not have a policy for ad valorem royalty rates. Worse, the ‘specific’ rates remain unrevised for sustained lengths of time. Royalty revenues accruing to the states surely need to reflect international scarcity value of ore, since our annual iron ore output is but a small fraction of world production. Already, cash-strapped, mineral-rich states, in a desperate bid to boost revenue accruals, link mining rights to putting up steel mills which may be locationally quite unviable. Instead, we need reasonable royalty rates and policy clarity. As an avowedly globalising economy we need to scrap the last vestiges of autarky and unabashedly pitch for openness.
-- The Economic Times Editorial dated 3rd June' 06.
posted by Loco at Monday, June 05, 2006
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