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A royalty increase for Victorian coal

The new budget for Victoria sets out a sharp rise in coal royalty rates."

Even as the economic state of the industry ebbs and flows, mining remains a vital part of Australian industry. The sector contributed over $36 billion to Australia's GDP in the fourth quarter of 2015, according to Trading Economics.

With its vast wealth of natural resources, the country sits on an underground treasure trove - one which has a number of stakeholders among the industry, state governments and the people of Australia. One of the ways established to ensure that all parties are able to share in the fruits of this industry is through the various mining royalties paid to each governing state.

New coal royalties in Victoria

Mining royalties are generally calculated as a percentage of the value of the mineral extracted; the set rate can vary based on the state and what is being mined.

These new coal royalty rates are estimated to generate $252 million in revenue for Victoria.

For years, the royalty rate on coal in Victoria has remained unchanged. The new budget for 2016-2017, however, will see a royalty rate three times higher than in the past, one more on par with other state royalties. While this is a rather sharp increase, it will still leave Victoria with the lowest cost for energy production out of all Australian states, according to the Victorian government.

"We are ensuring Victorians get a fair return for the use of our state's natural resources," said Treasurer Tim Pallas.

This increase is projected to generate $252 million in revenue for Victoria. The state government also noted that this measure should not lead to an increase in the cost of household electricity - which is lower than other states, according to the Australian Energy Market Commission.

Royalty variations across the states

Royalty payment rates for coal vary drastically in each state, ranging from 2.7 to 15 per cent according to a report by PricewaterhouseCoopers (PwC). Even states in the middle of that range generate a sizable amount of revenue through these royalties.

New South Wales, for instance - with royalty rates of 6.2, 7.2 or 8.2 per cent depending on the type of coal mine - took in $1.16 billion in coal royalties.

Time will tell how the Victorian royalty increases in particular affect the mining sector in Australia.

The Victorian royalty increase is set to bring revenue to a level in keeping with other states.The Victorian royalty increase is set to bring revenue to a level in keeping with other states.

Interconnect Systems has a comprehensive background in aerospace and defence engineering, being an industry leader for more than 20 years. It provides electrical interconnect products and solutions, including cable and wire harness manufacture. For more information on the best backshells and cable harness solutions, contact Interconnect Systems today on 1800 812 214 FREE.

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