India: HC strikes down differential royalty imposed by Karnataka govt

The High Court of Karnataka has ruled that the state government cannot charge a differential royalty again, post processing of mineral ores, having charged royalty on run of mine (ROM) ore under the Mineral Concession Rules.

Striking down Rule 4(10) (b) of the Karnataka (Prevention of Illegal Mining, Transportation and Storage of Minerals) Rules introduced in 2011, the HC in its order last month held the said rule was 'ultra vires'. The move is expected to benefit pellet producers in the state.

The rule had been challenged by Karnataka-based miner MSPL. The state government had collected royalty at the mine before the ore was transported to the petitioner's plant - where it was separated into fines used for pellet-making and lump, which were not used for pellets. Under this contested rule, the state would impose a differential royalty on the lump ore, which MSPL while moving court in 2017 had argued was 'unconstitutional'. The miner had also sought a refund of the differential royalty it had paid.

The court agreed with MSPL that the powers to frame rules pertaining to royalty lie with the Centre alone, and this particular rule of the Karnataka government was in direct conflict with the provisions of the Mineral Concession Rules. While striking down the rule the court, however, clarified that its order did not, in any manner, affect the royalty which had been paid earlier.