National Mineral Policy 2006 - Department of Mines

next three-year period as well. In such cases, a lowering of rates could be consideredonly in those cases in which there is evidence to show that the royalty rates areinhibiting mining operations and mineral production is registering a downward trend.The rates that are already on ad valorem basis should be also revised on the basis ofthe same yardsticks—i.e. as a norm, consider raising the rates to the level in WesternAustralia unless there are factors justifying a lower rate in India, and leave the ratesunchanged if the rates are higher than those in Western Australia unless there areindications that the existing rates are inhibiting mining operations. Another point to beborne in mind by the Study Group is that the royalties on base metals, noble metals,and precious stones need to be at low levels as an incentive for exploration in theseminerals in which the country is grossly deficient. [6.18]• The valuation of the mineral for the purposes of royalty should be based on thetransaction value and should include the profit element over and above the unit cost ofproduction. For export consignments the system is quite appropriate as the FOB priceis taken as the basis and the transport cost from the pithead to the port as well as theloading and unloading charges and the port charges are deducted therefrom. Fordomestic sales also, the sale price rather than the pit mouth value should be taken intoconsideration. Thus the profit element must be added to the cost of production. Theideal would be to use the sale price to the end-user as opposed to the middleman asthe basis for determining the valuation. From the sale price the element of transportand loading and unloading costs must be deducted as in the case of FOB price forexport consignments. In the absence of the sale price, the present system of 20 percent mark-up on the pit mouth value could continue on an ad hoc basis. For captivemines, the reported price is suspect and should not be used as the basis for calculatingthe average monthly value. It should be ensured that the IBM takes into account onlyarm’s-length transactions in recording the monthly state-wise and mineral-wise prices.[6.19]ILLEGAL MINING• Effective deterrent action should be taken to stop illegal mining. The deterrents in lawat present have not worked mainly because of the lack of teeth. The penalties shouldbe increased several fold and so should the punishments. Illegal mining amounts to214