The Ministry of Coal has constituted a nine-member study group to look into the issue of revision of rates of royalty on coal and lignite.

Headed by Additional Secretary, Ministry of Coal, the study group will consider whether the rates of royalty need to be revised keeping in view the impact, if any, on consumers, and also the revenue accruals to the producing states and other relevant factors. In case of revision, it will recommend the percentage hike or otherwise in the rates of royalty.

The present rate of royalty on coal is 14 per cent ad-valorem on the price, as reflected in the invoice, excluding taxes, levies and other charges. In case of lignite, the rate of royalty stands at 6 per cent ad-valorem on the transfer price as ratified by the Central Electricity Regulatory Commission, and if sold to other consumers, 6 per cent ad-valorem on the price as reflected in the invoice excluding taxes, levies and other charges.

Besides considering the revision of rates of royalty, the study group is also empowered to make other necessary recommendations under the terms of reference.

Among other members of the study group are Joint Secretary, Ministry of Coal, representatives of Ministry of Mines and Ministry of Power, CMD, Central Mine Planning and Design Institute, representative of Coal India Ltd, representatives of Federation of Indian Chambers of Commerce and Industry and Federation of Indian Mineral Industries, and Director, Ministry of Coal.

The study group will submit its report to the Ministry of Coal by January 21, 2015.

The rates of royalty on coal and lignite were revised in August 2007 based on a hybrid formula on the recommendations of the Economic Advisory Council to the Prime Minister and the Committee on Royalty set up by the Ministry of Coal.

The formula stipulated for determining royalty is R (Royalty Rupees/tonne) = a + bP where ‘P’ is the basic pithead price of run-of-mine coal and lignite as reflected in the invoice, excluding taxes, levies and other charges, and ‘a’ means the fixed component and ‘b’ refers to the variable or ad-valorem component.

The rates of royalty were again revised in May 2012 on the recommendation of a study group set up under the chairmanship of Additional Secretary, Ministry of Coal.

Under section 9(3) of the Mines and Mineral (Development and Regulation) Act, 1957, the central government is empowered to amend the Second Schedule to the Act so as to enhance or reduce, once in three years, the rates of royalty on minerals specified in the First Schedule of the Act including coal.

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