District Mineral Fund collections bounce back from lockdown lows

Monthly collections in District Mineral Funds (DMF) have recovered significantly from their lockdown lows, with the gap between collections during 2020 and 2019 narrowing by September-end.

According to data shared by the Ministry of Mines, country-wide DMF collections last month stood at ₹718.46 crore, up from ₹417.29 crore in May, when the country was in the throes of the Covid-19 lockdown.

But compared to the ₹770.99 crore accrued in September 2019, the collections trailed by 6.81 per cent year-on-year.

Under the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY), mining companies have to make a contribution for the development of districts where mining activities take place, over and above their royalty payments.

These DMF collections, therefore, are directly linked to the country’s mineral output.

The amount is accumulated in funds controlled by individual District Mineral Foundations.

Arriving at the amount

For mining leases granted on or after January 12, 2015, an incremental amount equal to 10 per cent of the royalty needs to be parked by the mining companies towards DMF contributions.

For those granted before January 12, 2015, the contribution is equal to 30 per cent of the royalty.

Since the royalty is levied either on a per-tonne basis or ad valorem (linked to the sale price of minerals), across States, an increase in mineral output means higher royalties being collected. This also means more accruals in the DMF. With the lockdowns curtailing economic activity, mineral production also took a hit.

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According to government estimates, the gross value added (GVA) at basic prices (2011-12 prices) in mining and quarrying declined 23.3 per cent in the first quarter of FY21 over the same period in FY20.

Performance within IIP

According to the Ministry of Statistics and Programme Implementation, the greatest contraction was reported in April 2020, when the mining sectoral performance within the Index of Industrial Production (IIP) fell 26.9 per cent compared to April 2019.

Also read: Core sector output contracts to 8.5% in Aug

The difference has subsequently narrowed down, with July 2020 mineral output being reported at just 12.97 per cent lower than July 2019. In August 2020, the performance of mining within the IIP fell 9.8 per cent year-on-year.

Odisha has reported the steepest dip in collections among States where DMF contributions were on the rise ahead of the lockdowns. According to Mines Ministry data, Odisha reported 20.45 per cent lower DMF collections for January-September 2020 at ₹1,920.84 crore, against ₹2,414.71 crore for January-September 2019.

Jharkhand also reported lower DMF collections at ₹958.68 crore during January-September 2020, against ₹1,156.76 crore in the previous-year period.

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