Gujarat's revenue from mineral royalty is likely to witness stagnation in its growth, missing the 20-25 growth growth it has witnessed since last two fiscals. The depleting reserves of lignite at Gujarat Mineral Development Corporation-owned Pannadharo mine in Kutch and delay in timely opening of Bhavnagar mine that was to act as a substitute, has dented the mineral royalty of Gujarat government.

Lignite contributes large part of total royalty income in the state. Lignite production in Gujarat is estimated to be decline by 10 lakh tonnes this year on account of closure of Panandhro mines, according to government sources. Last year, the lignite production in the state stood at 99 lakhs (9.9 million) tonnes resulting into a royalty income of appoximately Rs 50 crore (Rs 500 million).

"Although there is no target set, the growth in income from royalty has been about 20-25 per cent annually. However, with some cement companies putting their projects on hold, there has been a dip in royalty income from limestone.

Also the state government has cracked a whip on illegal bauxite exporters due to which there was a dip on royalty of the mineral. Bauxite contributes Rs 20-25 crore (Rs 200-250 million) royalty annually and there has been a dip of Rs 4-5 crore (Rs 40-50 million) in its revenue," said government sources familiar with the development.

Data provided by the government show that the government officials have recovered Rs 10.18 crore (Rs 101.8 million)as on December 2009 by surprise checks and searches. In 2007-08, total 7,635 cases were filed agaist those indulging in illegal mining and Rs 14.88 crore (Rs 148.8 million) were collected from them.

However, with the opening up of Bhavnagar mine two months ago and work going on in full throttle, the loss of income from Pannandharo is likely to recovered to an extent.

Gujarat government has collected Rs. 281.80 crore (Rs 2.81 billion) as mineral royalty from mining industry in the state for the nine months upto December 2008. Last year the income from mineral royalty for the first nine months stood at Rs 266 crore (Rs 2.66 billion).

"Gujarat government's income from mineral royalty stood at Rs. 363.43 crore (Rs 3.63 billion) by the end of fiscal 2007-08. As on December 2008, Gujarat has registered royalty income of Rs. 281.80 crore (Rs 2.81 billion)", Gujarat government said in a written reply in the state assembly. Royalty income is likely to increase by the end of fiscal 2008-09, however the 20 per cent target might be hard to achieve, sources said.

Gujarat is a mineral rich state both in terms of reserves and production. The sector contributes 2.9 per cent of the State Gross Domestic Product. Gujarat government has been constantly trying to control illegal mining of minerals in the state.

Apart from a panel of chartered accounts to scrutinise mine leases and records to control royalty evasion, government has also set up a special cell to detect evasion of royalty.