By Ajoy K. Das
India’s Ministry of Mines has commenced the process of framing a National Mineral Index (NMI) of various minerals, but the mining industry has opposed some of the benchmarks being considered in evolving such an index.
The NMI, as proposed by the government, would form the basis of all statutory payments like auction premium, royalty, district mineral fund (DMF) contribution that goes toward development of a local area affected by mining and National Mineral Exploration Trust (NMET).
As things stand now, the Ministry of Mines is proposed to frame NMI for minerals based on National Coal Index (NCI), which is based on state-run miner, Coal India Ltd.’s (CIL) notified sale price, CIL auction selling price and import price.
However, the domestic mining industry has pointed out that while the bulk volume of coal produced in the country is consumed for power generation, which is a government-regulated sector where tariffs are government determined, non-coal minerals are consumed by non-regulated industries like steel, aluminum, cement and the like. Hence, methodology for the calculation of NMI should be fundamentally different that NCI.
In a communication to the Ministry of Mines, the Federation of Indian Mineral Industries (FIMI), the apex representative body of domestic miners pointed out that basic premise of NMI is that present statutory payment including auction premium royalties, DMF, NMET are absed in “Average Selling Price (ASP)” published by the Indian Bureau of Mines (IBM).
FIMI has argued that the present system of ASP is a realistic price discovery mechanism where the actual transaction price of the top 10 non-captive mines in each state sold at an arm’s length is captured, and in short ASP is the weighted average of the ex-mine price of all non-captive mines.