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Business News/ Economy / Bill to make mines, minerals cheaper to attract investors
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Bill to make mines, minerals cheaper to attract investors

ASP, which can differ in each state, includes royalty payments to the DMF and the NMET

New definition of the ASP would exclude GST, royalty to NMET and DMF, export duties and other levies from the way the price is calculated. htPremium
New definition of the ASP would exclude GST, royalty to NMET and DMF, export duties and other levies from the way the price is calculated. ht

NEW DELHI : Proposed amendments to the law governing mines and minerals will seek to change how the average price of minerals is calculated in order to make them cheaper —for both sales and auctions—and more attractive to investors, two people aware of the development said.

The way this is proposed to be done is by removing an anomaly called ‘royalty on royalty’. The average sale price (ASP) of a mine has several components, including the royalty paid to the state government by the company that owns the mine.

However, this is in addition to the royalty investors have to pay to states, which is calculated as a percentage of the ASP. This is the ‘royalty on royalty,’ which becomes an additional charge on miners.

Currently, ASP, which can differ from mine to mine in each state, includes royalty payments to the District Mineral Foundation (DMF) and the National Mineral Exploration Trust (NMET).

“Charging royalty and premium on the sale value that includes royalty is not an appropriate way to collect revenue and leads to cascading effect on both royalty and premium. It also creates complications in changing royalty rates," said one of the officials cited above.

“The coal ministry has addressed this issue through a notification way back in 2012. The time is now right to make changes even for non-coal minerals."

The government proposes to correct this by including a definition of ASP in the Mines Minerals Development and Regulation Act, 1957, through an amendment, this person said.

He said the new definition of the ASP would exclude GST, royalty to NMET and DMF, export duties and other levies from the way the price is calculated.

One of the fears among states over the proposed changes was that it would impact their royalty earnings as it would now be calculated on the lower price of minerals.

But officials argue that removing the “cascading impact of royalty on royalty" will likely raise investor interest and increase participation in future auctions, thereby making additional revenue available to state governments. This is also expected to give a boost to the sector.

Currently, ASP is not mentioned in legislation but is part of rules that only allow the exclusion of goods and services tax (GST) but non-exclusion of royalty, DMF and NMET for ASP calculation.

This meant that recent changes in GST on ores did not impact the ASP of the mineral and as a result, royalty and premium were also not affected.

Queries sent to the ministry of mines on the proposed changes remained unanswered.

The MMDR Amendment Act 2015 introduced auctions for minerals. All auctions take place by bidding on a percentage of ASP payable.

It is expected that the changes in ASP calculation would be included as part of broader reforms in the mining sector. The proposal would be put up before the cabinet, and the amendment bill introduced in Parliament in the winter session.

All six key amendments to the Act are being looked at by the government with the prime aim of increasing investment in the mining sector and improving the country’s resource base.

Major investors in mining in India include the Vedanta group, Tata group and Aditya Birla group and ArcelorMittal.

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ABOUT THE AUTHOR
Subhash Narayan
Subhash is the infrastructure editor at Mint and tracks the momentous developments taking place in the space that is fast changing the Indian landscape. He feels that reporting has been a passion that provides the necessary adrenaline rush and keeps you going.
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Published: 01 Sep 2022, 01:07 AM IST
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