Move to impose royalty on all miners gets strong push

(Second of a series)

In November last year, the Commission on Audit and the Department of Finance renewed calls to impose royalty fees on all mining projects, including those outside mineral reservation areas (MRAs).Environment and Natural Resources Undersecretary Jonas Leones said this was something that the Department of Environment and Natural Resources (DENR) also wanted to pursue.Currently, royalties are charged only on mining operations within MRAs given that the government spends a considerable amount of funds to preserve these areas.

Certain mining areas are declared MRAs if they are highly mineralized or with high-mineral potential and if national interest so requires, that is when there is a need to preserve strategic raw materials for industries critical to national development, or for scientific, cultural or ecological value. The Chamber of Mines of the Philippines (COMP), the biggest organization of large-scale miners in the country, strongly opposed it.

“Imposing additional royalties on Philippine mining projects outside [MRAs] will stunt the industry’s growth and will provide additional revenues only in the near term, which we believe is shortsighted,” said COMP vice president for communications Rocky Dimaculangan.Allies in Congress

Dimaculangan said the measure would make the local mining industry uncompetitive and deter potential investors from coming in.According to Mines and Geoscience Bureau (MGB) director Wilfredo Moncano, there are at present only 11 companies that are paying royalty fees to the government, now at 5 percent of gross revenue.Imposing royalty fees on all mining firms would be based on the premise that the minerals are owned by the state.

“If we can include those outside MRAs, the government take from these companies would increase to 9 percent from 4 percent of [gross revenue], 5 percent royalty fee and 4 percent excise,” said Moncano. “That is a huge amount. But we need legislative support.”

MGB found allies in Congress who are ready to throw their support to the proposed imposition of royalty fees even on non-MRA sites, Moncano added. Representatives Robert Barbers and Martin Romualdez received the proposals with optimism.In a report, COA said that as much as P13.23 billion in possible government earnings from royalties were lost between 2018 and 2019, and up to P55.4 billion in the last decade.

These could have been used to boost the economy, and increase the mining industry’s contribution to the country’s gross domestic product which is currently at less than 1 percent.

Despite the opposition of mining firms, both Leones and Moncano believe that charging royalties on more mining operations is achievable in the near term than developing the domestic ore processing industry.

Balancing act

Both officials also considered that both reforms would come with compromises – a tough balancing act to ensure that all stakeholders would have a seat at the table.

“We are already discussing what we can do to cushion the impact [of the proposals] on all parties. We have to negotiate,” said Leones. “What we can assure everyone is that the DENR would be tougher when it comes to monitoring these mines.”

Since EO 130, Leones said there were already 100 new mining projects in the pipeline, 35 of which were being monitored by the government and were expected to be given permits. These firms may start operation in six months or a year, depending on the the speed of the processing of their applications.

These do not include the 65 mining applications that are sitting on DENR’s desk. In one to five years, the agency could raise P21 billion from additional mining operations, Leones added.

For now, the DENR has brushed off calls by environmental crusaders to scrap EO 130, stressing that environmental compliance would remain a top priority of the agency.

Leones said maximizing our mineral resources was one of the ways that the Philippines could resolve its financial problems and pay its debts.

(TO BE CONTINUED)