Centre may share proceeds from export duty on iron ore with states

NEW DELHI: This may come as good news for mineral-rich states. The Centre may consider sharing a portion of the recently imposed export duty on iron ore with states. The move is aimed at providing additional revenues to mineral-rich states, where royalty rates have remained abysmally low. Resentment expressed by several states over the Centre’s decision to pocket the entire levy on the mineral may also have swayed the Union government.

This year’s Budget has imposed an export duty of Rs 50 per tonne on iron ore fines with less than 62% iron content and Rs 300 for the remaining ore. The Centre expects to collect over Rs 2,000 crore from this duty. Even if half of it is shared, mineral-rich states — including Jharkhand, Chhattisgarh, Orissa and Karnataka — could get over Rs 1,000 crore. This would be four times the Rs 250 crore that states receive annually as royalty on iron ore.

The issue of sharing the duty may come up for discussion at the next meeting of the GoM on new National Mineral Policy on June 26, an official source said.

If a consensus emerges at the meeting, the GoM may ask the finance ministry to notify the changes, the source added. The issue has been discussed during the meeting of the mines ministry and the Planning Commission.

“Minerals belong to the states and there is no reason why the Centre should levy a duty and pocket all its benefits. The idea behind the duty was to create a deterrence for exports. The Centre should either pass on the entire collection from this duty to states or share a substantial portion with them,” a Planning Commission official said.

At earlier meetings on the subject of iron ore exports, a few states raised the issue of sharing the export duty and changing royalty rates on minerals from the present specific duty to ad valorem duty. In fact, the Hoda committee, which framed the new mineral policy, has also recommended that royalty should shift to ad valorem rates benchmarked against Western Austrian levies, which works out to about 7.5% of the per-tonne price of minerals.

As the export duty and proposed ad valorem duty on iron ore would increase the overall levy component on the mineral to 15%, the view is that royalty on ore should be increased moderately and the export duty should be divided between the Centre and the states.