New Delhi: The Centre has advised the Odisha government to closely scrutinise profits earned by iron ore miners to establish that the industry is making super normal profits in the wake of state government seeking imposition of Mineral Resource Rent Tax on mine owners.
"The request was examined and government of Odisha has been advised that it is necessary to closely study the profits earned by various types of miners in iron ore mining ... In the light of various incidences of taxes and levies on the mining sector ...," Mines Minister Dinsha Patel said in a written reply to the Rajya Sabha.
He added that closer scrutiny of profits earned by the industry, including small and medium scale miners and captive miners, is required as royalty is levied on ad-valorem basis at pit-mouth value of mineral and not on the FOB (free on board) value.
At present, royalty rates are fixed by the state governments in consultation with the Centre.
Last year, the Odisha government had sought Union Mines Ministry`s consent to levy the tax on the lines of Australia`s Mineral Resource Rent Tax on miners, which are supposedly making super normal profits in the state.
Early this month, Odisha Chief Minister Naveen Patnaik also wrote to Prime Minister Manmohan Singh seeking his intervention on the matter.
Patel, in his reply, said the new Mines Bill, Mines and Minerals (Development and Regulation) Bill, 2011 has provisions to set up a District Mineral Foundation wherein every miner would be required to pay an amount equivalent to royalty.
Besides, "there are provisions for State Mineral Funds (in the new Bill) which can serve as a substitute to the suggested Mineral Resource Tax," he said.
As per the new Mines Bill, money from the proposed District Mineral Foundation will be used on people affected by mining and for local area development.
The proposed law, which is before a Parliamentary Standing Committee currently, also has provisions of 10 per cent state cess of the royalty amount for minerals mined in a state.
The Mines Minister also said that the Odisha government is part of a study group of the Mines Ministry for review of royalty rates and dead rent.
"Therefore, (it) has sufficient opportunity to effectively contribute in developing a mechanism to work-out a rational rate of royalty on iron ore, which would adequately ensure fair compensation to the state government," Patel said.