The Coal Ministry has set up a study group in October for revision of royalty rates on coal and lignite, the Coal Minister, Mr Sriprakash Jaiswal, in a written reply to Rajya Sabha on Monday.
The study group is seeking comments from stakeholders such as major coal producers and consumers and coal-bearing State Governments on the issue. The new royalty rates would be announced by the Government after examining the recommendations of the study group, Mr Jaiswal said.
Stating that no mistakes were made earlier in revising the rates of royalty on coal, Mr Jaiswal said the rates were notified after due examination and wide consultations by obtaining the views and comments of all the stakeholders.
In view of the complexity involved in the issue of payment of royalty on coal on ad valorem basis versus the tonnage basis, the issue was also examined by the Economic Advisory Council (EAC) to the Prime Minister.
Mr Jaiswal further stated that the EAC to the Prime Minister had recommended the formula for fixation of royalty (with fixed and variable component) which balances the revenue needs of the coal producing States, the concerns of the coal consuming States/organisations and the overall interest of the economy.
The formula was agreed to by the Royalty Committee of the Ministry as it addresses the demand of coal producing States in as much as the increase in the prices of coal would lead to a corresponding increase in the royalty accruals to them. At the same time, for the consumers such as companies in power, cement and steel sectors, the impact of higher royalty would be moderated to some extend.
Besides, the formula based royalty rates has an ad valorem component of 5 per cent, which led to higher revenue accruals to the States, corresponding with any future increase in coal prices. Hence, the question of losses to the coal bearing States does not arise, Mr Jaiswal added.
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