The coal ministry has proposed to replace the 26% profit sharing between coal and lignite miners with project people with a new royalty payment system

It may be recalled the Mines and Mineral (Development and Regulator) Bill of 2011, to replace the old one was tabled in the Parliament in December 2011, when it was sent to the Standing Committee for its recommendations.

It would appear when such matters are referred to various Committees, no time frame is set within which they ought to submit their views and recommendations.

Which is why, the final recommendation has taken a good 15 months to come to public notice now.

The original provision called for 26% profit sharing by coal and lignite miners with the project affected people.  Now, the Coal Ministry has proposed that this will be replaced by a system based on royalty payment by firms concerned.

In order to take care of the welfare of the affected people, a new District Mineral Foundation (DMF) has been created. The exact terms of reference of this DMF is not yet known, but the new law proposes payment of an amount equivalent to the royalty paid by companies to state government concerned. The mechanism for such payment may also have to be worked out.

Nevertheless, such moves will eventually affect the consumer who will foot the bill, as such costs will be passed on to him!

Also, at present, the rate of cess, amounting to 10% of the royalty is paid to the state government by miners. The Standing Committee has recommended that it is up to the state to increase or decrease this percentage of cess chargeable and has stated that while issuing mineral concessions, they should not put any pre-condition about location of the industries, which require the mined product.  The tendency so far has been driven by the regional consideration of development and employment potential of the State.

The panel had also suggested that if shares are allotted to the affected people these should be made transferable, and issued at par value.

Provisions under this procedure of share allotment, though a novel idea, would also ensure that there is a guarantee of a regular income through dividends, and other related benefits, all of which are a welcome step in the right direction. In many organizations, offers of employment, for at least one member of the affected family, have also brought about enthusiastic response in the past.

In fact, in case of lump sum compensations, when involved, why not encourage the affected people to redeposit it with the miner in an escrow account under the Ministry of Finance or some sort government supervision, so that this fetches a regular additional income in terms of interest?

Full market reactions from Miners are likely in the next few days.  But, in the meantime, coal miners would show sign of relief that the coal regulator will not determine the final rates, though he may be involved in other areas in case of disputes etc.

Time is the essence of any contract or proposal.  Such matters should not be left linger on for months.

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)