Kirloskar Ferrous Industries Ltd. failed to secure relief from the Supreme Court after the top court upheld rules requiring royalty, District Mineral Foundation (DMF) contributions and National Mineral Exploration Trust (NMET) payments to be included in the sale value used to calculate iron ore royalties.
The ruling is a setback for iron ore miners seeking lower royalty obligations but preserves a revenue framework that the Centre argued is critical for protecting state finances. According to submissions placed before the court, changing the methodology could have reduced state government revenues by about Rs 6,200 crore annually based on FY24 production levels. The Centre further estimated that the annual impact could rise to around Rs 14,000 crore by FY30 as production from auctioned mines increases.
A bench of Justices J.B. Pardiwala and K.V. Viswanathan dismissed a challenge to provisions under the Minerals Concession Rules, 2016 and Mineral Conservation and Development Rules, 2017, ruling that the methodology was constitutional and did not violate the Mines and Minerals (Development and Regulation) Act.
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The dispute centered on the calculation of the Average Sale Price (ASP), a benchmark used to determine royalty payments and mining lease premiums. Miners, led by Kirloskar Ferrous, argued that including royalty, DMF and NMET payments in the sale value effectively resulted in a cascading levy, commonly described as "royalty on royalty", inflating their financial burden.
Rejecting the challenge, the Supreme Court accepted the Centre's argument that the formula serves as a safeguard against manipulation of iron ore prices and royalty payments. The judgment noted that the government had produced data showing instances where miners allegedly reported lower-priced dispatches in ways that depressed ASP calculations.
The court held that the petitioners had failed to establish that the methodology was arbitrary or lacked a rational connection with the levy. It said it found "nothing manifestly arbitrary" in the framework and accepted the government's contention that the mechanism was intended "to suppress the mischief, to prevent evasion to the extent possible and to advance the remedy."
The bench also rejected comparisons with coal royalty rules, observing that coal and iron ore operate under different pricing mechanisms. Comparing the two sectors was akin to "comparing apples and oranges," the court said.
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