MAC: Mines and Communities

States demand profit share

Published by MAC on 2001-05-01

States demand profit share


Ranchi, April 13: Two-day inter-state council meeting, attended by chief secretaries and energy secretaries of 12 states, has concluded without making any recommendation.

Council secretary Amitabh Pandey today indicated that the Union government would be presented a final report in November.

This meeting at Ranchi, he said, was meant to merely elicit the views of the states seeking adequate compensation. The council deliberated on a draft report prepared by TERI (Tata Energy Research Institute) on the states' demand on enhanced royalty on natural resources and also on royalty based on value or price rather than tonnage.

Pandey confirmed Orissa, Jharkhand and Chhattisgarh raised the issue of "profit sharing". Since coal and steel companies have been earning profits of several thousand crores, primarily because of increasing demand and price-rise in the international market, the states suggested that the companies share this profit with them. This was opposed by the companies and Coal India Ltd chairperson P. Bhattacharya made a spirited plea for states to first become stake- holders or share-holders of the companies.

The states countered by saying that since the Centre was considering the proposal of several states that they be given 12 per cent of the power generated by hydel units based in these states, either free or at a subsidised rate, there is no reason why mining companies should not share profit earned from exports and otherwise. TERI in its draft proposal suggested a mechanism that could be adopted whereby states get a part of the production or profits that the companies make. This, TERI, felt would tackle the grievances of the states demanding higher returns for the minerals mined.

The council dropped hints that this proposal could figure prominently in the list of suggestions to be sent to the Centre. Pandey, too, felt profit sharing proposal was better than having new taxes that could become irksome for companies that are into mining. Similarly, the states would suffer if prices fluctuate if royalty is based on ad-valorem.

Chief secretary of Chhattisgarh Shivraj Singh said they would welcome if this suggestion is accepted by the Centre.

Of the three states, only Orissa takes five per cent of the company's profits for development of the local mining area. Orissa mines secretary L.N. Gupta and his Jharkhand counterpart Jai Shanker Tiwari were of the view that such suggestions are feasible for implementation.

Gupta went further demanding that till royalty issue is resolved, the Centre should make for interim arrangements so that the states do not continue to suffer financially. All these three states have been demanding at least 20 per cent royalty on sale price of coal instead of the present royalty based on tonnage.

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