Government proposes to resolve current impasse in mining sector

New Delhi: The beleaguered mining sector is likely to witness improved activity with the government on Thursday proposing to resolve the "current impasse" expeditiously aimed at encouraging investment and bridge supply-demand gap.

Paying heed to requests of the states, Finance Minister Arun Jaitley in his maiden Budget speech also proposed to revise royalty rates on minerals which would help swell their coffers.

"It is my Government's intention to encourage investment in mining sector and promote sustainable mining practices to adequately meet requirements of industry without sacrificing environmental concerns. The current impasse in mining sector, including, iron ore mining, will be resolved expeditiously," Jaitley said.

He also said that changes, if necessary, in the MMDR Act, 1957 would be introduced to facilitate the objective.

India's mining sector, particular mining of steel-making raw material, iron ore, was affected after the Supreme Court imposed ban in Karnataka and Goa on allegations of illegal mining. The Supreme Court had banned iron ore mining in Karnataka in July-August, 2011, and in Goa in October, 2012.

Subsequently the ban was lifted with a cap on production.

As a result, both production and exports of iron ore fell drastically. India's share in the iron ore export market fell and domestic steel makers had to undertake a cut in capacity utilisation and resort to imports of iron ore in some cases.

Jaitley also proposed to revise the royalty rates on some minerals which has been pending since 2009.

"There have been requests from several state governments to revise rate of royalty on minerals...Last revision took place in August, 2009. Therefore, another revision, which is due, will be undertaken to ensure greater revenue to the State governments," he said.

The revision in royalty rates is undertaken once every three years. The entire royalty goes to states.

The Mines Ministry has recently floated a draft cabinet note for inter-ministerial discussion to revise the rate of royalty on minerals such as bauxite and iron ore.

If approved by the Cabinet, the annual revenue collection of mineral-bearing states such as Chhattisgarh, Odisha, Jharkhand, Karnataka and Goa would swell cumulatively by 41 per cent to Rs 13,270 crore, according to an estimate by the Mines ministry.