Last Friday, the Ministry of Land and Resources (MLR) submitted a report to the State Council in which it proposed raising the average collection ratio of mineral resources compensation to three percent and enlarge local governments' shares of the compensation, according to Caijing (Finance) Magazine.

Based on the Provisions on the Administration of Collection of the Mineral Resources Compensation, promulgated in 1994, all compensation for mineral resources must be turned over to the central treasury on the spot. It must also be separately settled at the end of the year according to the distribution ratio between the central government and provinces, autonomous regions, or municipalities directly under the central government.

Usually, local governments of provinces and municipalities share half of the compensation while autonomous regions share 60 percent.

However, local government returns from distribution are usually far below the stipulated ratio. They have therefore looked for more profits from selling exploring and mining rights to business companies.

The MLR's report suggests 80 percent of mineral resources compensation should be allotted to local government, in an effort to satisfy local governments in return for their mineral resources.

Last year, the country collected a total 5 billion yuan (US$675 million) from mineral resources compensation, most of which came from major mineral origins.

Once the MLR's proposal is approved, the local governments of mineral origins then can concentrate on infrastructure and environmental protection to promote sustainable use of raw minerals, rather than making extra profits.

In the meantime, the MLR will constitute corresponding administrative rules to normalize and bind the usage of the mineral resources compensation.