Mineral Royalty

Mineral royalty is the payment made by a mining-lease holder for the right to remove or consume minerals from the leased area. Under Section 9 of the MMDR Act, 1957, it is linked to the quantity or value of the mineral extracted and is paid at the prescribed rate.

Liability and calculation

Royalty becomes payable when a mineral is removed or consumed from the leased area by the lease holder or persons acting through the holder. It is therefore linked to actual mineral production, unlike a fixed annual charge.

• Rates differ across minerals and are specified in the Second Schedule to the Act.
• Depending on the mineral, the rate may be based on its value or on a physical unit such as weight.

Rate-setting and coverage

The Central Government may amend the Second Schedule by notification to increase or reduce royalty rates. Under Section 9, it cannot enhance the rate more than once during any period of three years.

• Sections 5-13, including Section 9, do not apply to minor minerals; State Governments regulate their royalty through rules made under Section 15.
• Royalty collected from mining leases is an important source of revenue for mineral-bearing States.

Distinction from related payments

Royalty is distinct from dead rent, which is the minimum annual payment for holding a mining lease. Under Section 9A, when both are payable, the lease holder pays whichever amount is greater.

• Contributions to the District Mineral Foundation under Section 9B are additional to royalty and are intended for persons and areas affected by mining.
• Royalty itself is general State revenue and is not automatically earmarked for mining-affected communities.

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