Government looking to address ‘issues, shortcomings’ in fixation of average sale price of minerals

The mines ministry is looking to address the “issues and shortcomings” that come in the way of fixation of average sale price (ASP) of minerals.

The government has also sought suggestions from various stakeholders to overcome the issue till the National Mineral Index (NMI) is formulated for individual minerals.

The development assumes significance in the wake of miners’ body FIMI earlier urging the Centre to continue with the present system of average sale price published by Indian Bureau of Mines (IBM) which it said is the most effective and transparent way to ensure price discovery and revenue to the exchequer.

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The mines ministry had in April constituted a committee for examining the double calculation of royalty due to its inclusion in calculation of ASP of minerals and developing an NMI for valuation of mineral resources as well as for determination of value for auction of mineral concessions and statutory payments for future auctions.

The committee has decided to “seek comments/suggestions from the governments of states and union territories, mining industry, stakeholders, industry associations and other entities concerned, on…the issues and shortcomings in fixation of ASP currently being done and suggest measures to overcome these till NMI is formulated for individual minerals,” the mines ministry said in a notice.

The panel has also sought suggestions on the incidence of double calculation of royalty, if any, due to its inclusion in calculating ASP and has also asked for measures to address the same, it said.

The panel under the chairmanship of former coal secretary S K Srivastava has members from different organisations of the central government.

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FIMI had earlier said that the basic premise of NMI is that the present statutory payments, including auction premium, royalty, District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) are based on ASP published by IBM.

“We submit that the present system of ASP is a realistic price discovery mechanism, wherein the actual transaction price of top 10 non-captive mines in a state sold at an arm’s length basis is captured. In short, ASP is the weighted average of the ex-mine prices of non-captive mines,” it had said.

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National Mineral Index is being developed on the lines of the National Coal Index (NCI), which is based on

(CIL) notified prices and auction prices and import prices, FIMI said.

While majority of the coal consumed in the country is for power, which is a regulated sector, all non-coal minerals are consumed for non-regulated sectors such as steel, aluminium, cement, etc.

Considering this fundamental difference of regulated and non-regulated consuming sectors, the methodology of calculation of NMI should fundamentally differ from that of NCI, FIMI had stated.

“We also understand that there is a strong attempt by players who have bid unsustainably high auction premiums to include captive sales transactions in NMI….This will help such captive players to report lower than market transactions, which will be captured in NMI, eventually bringing it down and associated statutory payments to the exchequer,” the miners’ body had said.

The CII had said that the development of the proposed uniform National Mineral Index for all minerals in line with National Coal Index will tackle the ambiguities in the current average sale price regime, resolve irregularities of high ASP of limestone and bauxite (metal).

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