Economy, Business And Markets

Waiting for a Resolution to Mine Royalties

Waiting for a Resolution to Mine Royalties Waiting for a Resolution to Mine Royalties

The deputy head of Iran Mine House has slammed the recent decision by the parliament’s Integration Committee which requires all mines across the country to pay royalties in the coming Iranian calendar year (to start March 21).

“The committee’s decision is hasty and irresponsible. If all mines will be required to pay royalties next year, more than 70% of the small and medium mines in the private sector will have to close down”, Mohammad-Reza Bahraman told IRNA.

Bahraman went on to criticize the decision, saying the resolution has not yet been approved by the Parliamentary Industries and Mines Committee and therefore should not be on the agenda in the Integration Committee. He warned that such a resolution will jeopardize the security of investment by private companies in the mining sector.

Nader Qazipour, a lawmaker who supports the inclusion of all mines for paying royalties, says the resolution has been approved in the Integration Committee with an 80% vote and is ready to be ratified on the floor. According to Qazipour, a principlist representative, following the ratification of the resolution, some 50 trillion rials will be deposited to the Treasury next year by the mines for their royalties which is said to be between 25% and 30% of their production.

Another member of the Integration Committee, Iraj Nadimi, told Eghtesadnews that mine royalties of between 23% and 30% were suggested in  the latest meeting attended by the deputy minister of industry, mine, and trade; the members of the committee, and the representatives of Golgohar and Chadormalu iron ore mines.

“The 25% mine royalty, which has been decided based on the law, will help remove the current obstacles in the iron ore sector and will protect the government’s rights”, Nadimi said, adding that the parliament will make the final decision over the issue by Wednesday.

The new resolution, if ratified and becomes a law, will require mines across the country to pay royalties for their sales. If they refuse to pay the sum, the Article 48 of Public Audit Act authorizes the ministry of economic affairs and finance to block the mines’ bank accounts and collect the royalties.

Golgohar and Chadormalu, two of the country’s major iron ore mines, experienced the same conundrum. In 2007, the IMIDRO took over the two mines in response to their resistance to the 30% royalties. The mines’ shareholders and beneficiaries then sued the IMIDRO and after many years, they seem to have won the case following the latest verdict given by the Court of Administrative Justice.

The Iran Mine House, as one of the opponents of the recent decisions over the mine royalties, says the 25% royalty for the mines’ sales violates the Article 14 of the Mining Act which stipulates that the ministry of industry, mine, and trade is authorized by law to receive minerals from the mines instead of money.

According to Bahraman, if the parliament ratifies the resolution and makes it legally binding, the private sector will withdraw its investment from the mining sector and the mines will consequently be run by the government. This is while, Bahraman said, the Constitutional Article 44 explicitly encourages the economy to move towards privatization.

Bahraman warned that such a decision would be a big shock to the private sector and serious consequences sould be expected.

The administration, in its budget proposal for the upcoming Iranian year, has called for a 30% royalty for Golgohar and Chadormalu iron ore mines while the parliament decreased the percentage to 25% for the two mines and included all the mines in the law.