For other minerals, companies must share sum equal to 100 per cent of royalty with project-affected people

Shooting down the proposal of the Ministry of Mines to switch to a royalty sharing mode, a Group of Ministers headed by Finance Minister Pranab Mukherjee on Thursday approved a 26 per cent profit-sharing mechanism for the coal sector.

For other minerals, it approved 100 per cent additional amount equal to the royalty for inclusion in the new mining legislation that is likely to be introduced during the monsoon session of Parliament.

Under this proposal, the mining industry would have to make a matching contribution equal to the royalty amount paid by them to the proposed development fund.

The GoM did not approve the proposal submitted by Mines Minister Dinsha Patel, who had sought to replace the provision in the new mining Bill for 26 per cent profit-sharing with those affected by mining projects with provision for 26 per cent of royalty share, a much lower figure.

“[The provision we have now approved] will put around Rs.10,000 crore at the disposal of the exchequer per annum for distribution in nearly 50 top districts of the tribal areas where such mining activity generally takes place. At an average, it will lead to distribution of Rs.200 crore to each district for development fund purposes,” a senior Minister said.

The 10-member GoM did not endorse the views expressed by Mr. Patel in his presentation for dilution of the profit-sharing clause in the case of coal in the new Mines and Minerals Development and Regulation (MMDR) Bill, 2010.

The Federation of Indian Mining Industries (FIMI) had suggested to the Mines Ministry that the holder of a mining lease should be liable to allocate a sum not exceeding 26 per cent of royalty in respect of any mineral raised and transfer the same to the District Mineral Development Trust.

The new legislation proposes to set up district-level bodies called District Mineral Foundation (DMF) and non-profit corporate bodies to oversee disbursal of compensation to local families affected by mining projects.