National Mineral Policy 2006 - Department of Mines

must provide revenues sufficient to cover all these costs, pay taxes, and provide the investorwith a competitive rate of return on investments.6.13 Annexure 10 provides a comparative picture of the royalty rates prevailing in Indiaand in other countries, drawn up by the Royalty Rates Study Group in 2004, duly corrected totake into account the latest information available from Australia, which is one of the majormining countries of the world. Three of the countries with major or significant miningactivity—Canada, Chile, and South Africa—do not levy any royalty. In Australia, each of theseven states has its own royalty rates. In all the states, the rates are predominantly in advalorem terms, largely in the range of 2.5–5 per cent. In a few cases in the major mining stateof Western Australia, the rate is 7.5 per cent for some important minerals such as iron orelumps, manganese, bauxite, diamonds, and precious stones. One state, the NorthernTerritories, is an outlier in having a uniform rate of royalty of 18 per cent for all products.One feature of the royalty rates in Western Australia is that the ad valorem rates are lower forbeneficiated iron ore.6.14 In Asia, two countries, viz. China and Indonesia, have significant mining activity. InChina, the royalty rates are predominantly 2 per cent, some of the major exceptions beinggold and precious stones at 4 per cent. In Indonesia, the royalty rates are mostly in the rangeof 3–5 per cent, except for diamond, for which the royalty rate is 6.5 per cent. In CentralAsia, Kazakhstan and Uzbekistan are two important mineral states. In Kazakhstan, for mostimportant minerals the rates are established through negotiations for each contract dependingupon the viability of the project. In Uzbekistan, the rates are generally very low, except forcopper (7.9 per cent), diamond (24 per cent), tungsten concentrate (8 per cent), and kaolin(7.9 per cent). African countries generally have low royalties, except for diamond andprecious stones, for which the rate is 10 per cent generally.6.15 A study of the royalty rate systems in other countries shows some other features aswell. In some countries, each mineral type is taxed at a different rate (such as in theapplication of a royalty assigned to each mineral type) or minerals are grouped and eachgroup is uniformly taxed (typical groupings include industrial and construction materials,fertiliser minerals, precious metals, precious stones, base metals, non-petroleum energyminerals, etc.). To some extent, the level of discrimination may depend on whether themineral is destined for a globally competitive market or for the local market. For example,126