Gujarat govt doubles royalty on sand, gravel, clay, will spike construction, housing costs

The state government has doubled the royalty on key construction minerals—sand, gravel, ordinary clay, and gypsum—by introducing a 100% premium alongside the existing rates. The move, implemented without prior notice on Monday night, is expected to push up construction and housing costs across the state and has drawn concern from mineral producers and infrastructure developers.

The revised rates, which came into effect immediately, caused a temporary suspension of the online royalty payment system on Monday evening. When services resumed, producers were met with updated charges and no prior warning, prompting confusion and industry backlash.

Construction sector braces for higher material costs

The increase in royalty and premium is expected to have a cascading impact on the construction and infrastructure sectors. Sand, gravel, and clay are essential raw materials in real estate and public works. According to industry estimates, the change could raise material costs by ₹85–₹100 per metric ton.

A single truckload of black trap stone, for example, may now cost ₹4,000 more than before. Contractors working under fixed-rate contracts may face financial strain, with potential delays in ongoing and planned construction projects.

Producers divided over government’s sudden policy shift

The sudden implementation has drawn mixed responses from mineral associations. While no formal protests have been announced, several industry groups are reportedly deliberating how to respond. A key concern has been the lack of stakeholder consultation and the abrupt nature of the policy rollout.

The government last revised royalty rates in 2015, following a pattern of 30% annual increases. A 2017 notification introduced a 100% premium on newly issued mineral leases, leaving the rates unchanged since then—until this latest decision, which applies a similar premium to all leases. 

Concerns grow over increase in illegal mining

The sharp hike in official rates has triggered fears of increased illegal activity in the sector. Even before the change, authorities were reporting instances of under-invoicing and royalty evasion at sand, clay, and black trap stone quarries.

The Mines and Minerals Department regularly seizes vehicles operating without valid royalty documentation and imposes penalties and recovery charges. With the new rates in place, officials fear that smuggling and other unauthorised practices could intensify.

Revised rates and applicable levies

Under the new structure, both royalty and premium are calculated per metric ton. The revised rates are as follows:

These figures do not include additional levies such as:

18% GST on royalty

10% District Mineral Fund (DMF) contribution

5% GST on material sales