Revision of coal royalty rates: CEA suggests new formula

The Central Electricity Authority (CEA) has asked the Ministry of Coal (MoC) to explore the possibilities of adopting coal-mine specific royalty rates, on the basis of the availability of coal at the head of a mine. The royalty rates to be determined in such a manner will also be subject to escalation based on the wholesale price (WPI) index for coal. According to CEA, while the prevalent formula determines royalty on the basis of the fixed and variable costs of coal production, resulting in varying rates for even the same mine, the proposed modification would ensure uniformity of royalty rates for all the coal mines. This would also reduce end-use price fluctuations, resulting out of the variable component of royalty. The central agency put forward this proposal while furnishing its comments on the proposed revision of royalty rates to the Study Group, constituted by the MoC, for making recommendations on this matter.

Notably, following consultation with all the stakeholders, the Study Group, under the Chairmanship of the Additional Secretary to the MoC, Alok Perti, is due to furnish its recommendations by July 15, 2010, to facilitate the revision of the royalty rates by August 1, 2010. These rates were last revised on August 1, 2007.