Royalty on coal and lignite fixed at 14 and 6 per cent of value

The Cabinet Committee on Economic Affairs (CCEA) today approved the proposal for adoption of ad-valorem regime for charging royalty on coal and lignite at the rate of 14 per cent and 6 per cent, respectively, and scrap the present hybrid formula.

As a result, the royalty revenue earnings of major coal producing states, viz, Jharkhand, Andhra Pradesh, Madhya Pradesh, Uttar Pradesh, Tamilnadu, Orissa, Nagaland, Meghalaya, Maharashtra, Chhattisgarh, Assam and Arunachal Pradesh are expected to increase on an average up to 17.31 per cent for coal and 14.53 per cent for lignite.

Major coal producing states will now earn revenue of about Rs6,980 crore in place of Rs5,950 crore, being earned at the existing rates, resulting in increased combined earning by more than Rs1,050 crore.

The CCEA decided to switch to an ad-valorem rate for royalty payment as well as per the recommendations of the study group constituted by the ministry of coal for revision of royalty rates on coal and lignite.

Accordingly, an ad-valorem royalty on coal at 14 per cent of the price as reflected in the invoice, excluding taxes, levies and other charges, will be paid as royalty to the respective states, CCEA said in a release.

The proposed royalty revision, however, will not be extended to West Bengal unless the cesses already imposed by the state government, are withdrawn. For states other than West Bengal that levy cess or other taxes on specific coal bearing lands, the revision of royalty allowed will be adjusted for the local cesses or such taxes so as to limit overall revenue to the ad-valorem royalty yield, the CCEA said.