By Anurjay Dhal
BHUBANESWAR: The Union Coal and Mines Secretary Anil Kumar Jain on Wednesday found himself in a sticky wicket after the Federation of Indian Mineral Industries (FIMI) put a startling revelation that 527 out of 844 Mining Companies Registered under ROC are running in loss across India. The Coal Mines Secretary Anil Jain was attending the 54th annual general body meeting in New Delhi, where FIMI President, Sunil Duggal drew his attention and said 527 out of 844 Mining Companies Registered under ROC are running in loss. “We are really grateful to Ministry of Mines and Ministry of Coal that even during challenging and critical time of nationwide lockdown, mining activities were allowed to continue their operations considering it as part of essential services. Despite immense hardships, mining sector on its own rose to the occasion and responded with agility and resilience to endeavour to continue mining activities to the extent possible by initiating stringent safety measures to ensure safety and well being of its employees, community and other stakeholders,” FIMI President Duggal said.
“Country is carrying a burden of unsold stocks of about 163 million tonnes of iron ore (as on 31st March, 2019), out of which Odisha and Jharkhand account for 137 million tonnes mainly comprising of fines with grades upto 62% Fe which are not required by the domestic steel, sponge iron and pellets plants. Since there is no domestic buyer for such material below 62% Fe, the only outlet left is exports.However, there is an export duty of 30% on +58% Fe iron ore. Further such nonmoving stocks lying in the mines are proving to be a major impediment in carrying out scientific mining. I would therefore urge upon you to kindly take up the matter with Hon’ble Finance Minister for complete withdrawal of export duty on iron ore upto 62% Fe content. Abolition of export duty upto 62% Fe will help in liquidating the huge non-moving stockpiles of iron ore lying at mine-heads leading to enhanced valuable foreign exchange earnings, increased revenue to the exchequer besides facilitating in carrying out scientific and sustainable mining,” he said.
“Jurisdictions, effective tax rate is as low as 31%, highest at 45%, average being below 40%. Over and above effective tax rate, Indian mining sector is burdened with plethora of other taxes and levies such as Net Present Value (NPV) for surveys and mining in forest land, auction premium, performance security, GST on royalty, DMF and NMET, stamp duty, compensation afforestation charges, 10% tax as levied by Hon’ble Supreme Court in Goa and Karnataka besides FDT levied in Karnataka etc. Government needs to realize that the taxation regime for mining in India affects all downstream industries and employment opportunities in the economy, while fuelling the already skewed balance of payment through additional import of minerals. We would therefore request you kindly to consider rationalization of the taxation structure for the mining sector for sustainable development and deriving long-term benefits in terms of sustained raw material security for industries.The mining industry is facing acute financial difficulty in utilization of the input tax credit availed by the mining companies on their purchases of input materials, capital goods and services etc. While higher rate of GST is charged on supplies and
services whereas GST on mineral and processed mineral is payable @5% and as such it becomes a case of inverted duty structure. Further GST on royalty is charged @ 18% on the royalty, DMF and NMET amount. Considering the present adverse economic scenario, high effective tax rate on mining in India and to have rationalization in GST structure, we request that GST on input raw materials, capital goods and services and on royalty should be charged on same rate as applicable forsale of minerals i.e. @ 5%,” he said.
“Mining, being the major economic activity generates employment in neighborhood and tribal areas. Mining sector has the potential to create a total employment for about 5 crores jobs by 2025. Being the source of raw materials for Indian industries and society, mining is crucial for both ‘Atmanirbhar Bharat’ as well as for India to become a $ 5 trillion economy by 2024,” Dugal said. “Exploration activities remain in the domain of Government agencies with emphasis mainly only on surficial deposits like iron ore, coal, bauxite, limestone, chromite and manganese ore etc. Out of total Obvious Geological Potential (OGP) area (0.571 million sq. km.), only 10% area is explored and out of this, and only 1.5% area of OGP is under mining. Owing to inadequate exploration and consequent under-harnessing of mineral resources, India is heavily dependent on imports of vital minerals like gold, base metals, platinum group of minerals, diamond etc. As compared to value of domestic production of minerals amounting to Rs. 2.44 lakh crores, country imported minerals and metals worth about Rs. 9.11 lakh crores during the year 2018-19 i.e. almost four times the value of its domestic production,” he said.
“Consequently, thecontribution of mining in country’s GDP remains at abysmal level of 1.75% againstother mineral rich jurisdictions like South Africa and Australia where mining sector’s contribution to their GDP is in the range of 7-7.5%.Despite having huge mineral potential, our country has not been able to attract investment in the mineral sector unlike the mineral rich countries. India has not only missed out on FDI, but also associated modern technologies for exploration which has constrained us to only produce easy-to-find bulk minerals, which are often surficial in nature. It is thus imperative that the nation becomes self-sufficient in minerals which we import. To achieve this objective, it is sine qua non that conducive regulatory framework needs to be in place which would facilitate entrepreneurs to generate adequate returns on investment (ROI) commensurate to the exploration risk, and timely development of high-value mineral discoveries and production of such minerals. Considering the strategic importance of attracting FDI and world-class technology in Indian mining sector,” he said.
“It is now more than five and half years that auction regime was introduced for grant of mineral concessions. However, so far, this mechanism has not been able to deliver the desired result for the faster development and harnessing of mineral resources. Subsequent to implementation of MMDR Amendment Act in January, 2015, 52 greenfield mineral blocks have been auctioned for grant of mining leases but it is a matter of grave concern that so far none of the auctioned block has come to a stage of production. Similarly, out of the 9 mineral blocks auctioned for
PL-cum-ML, only in one case, Prospecting License has been issued. Even many of the brownfield auctioned mines which were already operational earlier are yet to resume production. This is a matter which the Ministry of Mines may like to ponder to hasten the process for early development of auctioned blocks. However the recent decision of Ministry of Mines for offering of mineral blocks with pre-embedded statutory clearances will prove to be a game changer for early production from the auctioned mines besides greater and competitive participation by the potential bidders and improving investor confidence,” he said.
“ We heartily welcome the initiative taken by Ministry of Coal for bringing transformational reforms in the coal sector by opening it up for commercial mining. This will facilitate in enhancing the production and bring efficiencies in the sector. As part of this initiative, 38 coal blocks have already been offered for auction. In order to have, greater and competitive participation by the domestic and international investors, it is desired that the terms and conditions for auctioning of the blocks particularly for flexibility in coal production and timeline of efficiency parameters be reviewed keeping in view the ground realities and current business environment.” The FIMI president said.
“We are happy to note that Ministry of Coal is contemplating to acquire land under Coal Bearing Areas Act, 1957 in respect of coal blocks being offered for auction under commercial coal mining. FIMI urges that such a provision should also be extended to all other minerals and a comprehensive regulatory framework be brought which may be captioned as ‘Mineral Bearing Areas Act’ covering all the minerals including coal for acquisition of land required for mining purposes. Such an initiative will give a major boost to the development of mineral sector in the country,” he said.
“In the case of bauxite, export duty is charged at the rate of 15% ad valorem which has adversely affected the export of non-metallurgical grade of bauxite particularly from the western coast of the country. As a result, a number of small bauxite mines in the State of Gujarat and Maharashtra have been closed or are operating at very low capacities. The quantum of exports of bauxite which had peaked to 8.91 million tonnes during the year 2015-16 has now sharply declined to only about 0.52 million tonnes during the year 2019-20. Considering that low-grade non-metallurgical bauxite is unsuitable and uneconomical for consumption by the
domestic aluminium industry and with a view to have optimum utilization of our lowgrade mineral resources, we request that the export duty @ 15% on exports of bauxite may be withdrawn completely which will lead to reopening of closed bauxite mines, employment restoration and contribution to states exchequer besides earning of foreign exchange. Despite the reduction in Corporate Tax Rate, the Indian mining industryremains highest taxed in the world. The effective tax rate in India works out 58% forexisting mines and 54% for mines granted through auction. In other resource rich,” Duggal said.
“The impact of COVID 19 has been so severe that country faced the worst contraction of GDP during first quarter of financial year 2020-21. While country’s overall GDP shrunk by 22.6% at current prices, manufacturing sector lost by 39.3% and mining sector faced the brunt of 41.3% in its GVA. Further many of the rating agencies and economists have forecasted contraction to the tune of around 10% in country’s GDP during the year 2020-21. As it is mining sector was
already passing through a difficult phase and impact of COVID 19 has now further given a major jolt to mining activities. As per the information laid down in Rajya Sabha on 19th September, 2020, out of 844 mining companies registered with Registrar of Companies (ROC), 527 companies are currently running in loss.
