GoM approves 26% profit-sharing for coal companies

India will soon have a benefit-sharing regime for those affected by mining projects, despite protests from industry.

The new mining Bill — approved by a 10-member Group of Ministers (GoM) headed by Finance Minister Pranab Mukherjee on Thursday — says coal companies will have to share 26 per cent profit with the local population. In case of other minerals such as iron ore, bauxite and limestone, the miners will have to share with the locals an amount equal to the royalty paid in the previous year.

The coal sector had been asked to pay 26 per cent profit as royalty collections from coal companies were low because of administered prices, said a senior official who did not want to be named.

Mines Minister Dinsha Patel, who piloted the drive to overhaul the Mines and Minerals Development and Regulation Act, did not give details, saying the proposal had to be approved by the Cabinet. Steel Minister Beni Prasad Verma, however, said the royalty norm had been approved for all minerals except coal.

Coal Minister Sri Prakash Jaiswal had earlier this year opposed linking of benefit-sharing to royalty saying this would impact the profitability of coal companies. Jaiswal refused to comment after the GoM meeting.

The decision is likely to dampen the spirits of Patel, who has been seeking 26 per cent royalty sharing instead of 26 per cent profit sharing. The proposal would have helped the mining industry as the outgo in case of profit sharing would be around Rs 9,000 crore a year. The outgo if 26 per cent royalty is shared is expected to be a mere Rs 2,600 crore.

Thursday’s meeting was attended by all the members of the GoM, except Home Minister P Chidambaram. “The GoM was unanimous in its decision to approve the Bill in its final form,” Mining Secretary Vijay Kumar told reporters after the meeting. After being approved by the Cabinet, the Bill will be placed in Parliament.

Law Minister Veerappa Moily, Commerce Minister Anand Sharma, Tribal Affairs Minister Kantilal Bhuria, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Environment Minister Jairam Ramesh also attended the meeting.