Government proposes windfall tax on miners

Industry body Federation of Indian Mineral Industries (FIMI) said the move would cripple miners as profits they earn are barely Rs250 a tonne compared to about Rs1,000 a tonne in Australia

On the heels of Australia announcing 40% tax on bumper profits of miners, India said it proposes a similar windfall tax on iron ore, reports PTI.

"We have already moved the finance ministry...we are for it (windfall tax). We have sent the letter," mines minister BK Handique told PTI in an interview.

He said the move, initiated after Australia announced such a tax on miners in the country would not only deliver "justice" to locals in mining areas through corporate social responsibility (CSR) but would check rampant illegal mining.

Australia proposed the tax in May after prices of iron ore and other commodities jumped on demand from countries like China. Windfall tax is levied by several countries on some super profit making industries.

But industry body Federation of Indian Mineral Industries (FIMI) said the move would cripple miners as profits they earn are barely Rs250 a tonne compared to about Rs1,000 a tonne in Australia.

"Corporate social responsibility (CSR) has to be maintained and all merchant miners have to pay," Handique said, adding that such a tax would be an additional source of revenue for the government from mining.

About 50% of India's domestic iron ore production is exported. Exports have nearly tripled over the last decade from about 38 million tonnes in 2000-01 to about 106 million tonnes in 2008-09. The country produced 215 million tonnes of iron ore in 2008-09.

At present, the government levies 15% export duty on iron ore lumps and 5% on fines.

Mr Handique, however, said that association of miners FIMI is opposing the move, though another industry body Indian Chamber of Commerce supports the windfall tax, a levy that is generally intended to prevent reckless exploitation of natural resources and curb profiteering.

"There are two groups. Actually, the Indian Chamber of Commerce have supported. FIMI (Federation of Indian Mineral Industries) has not," the minister said.

FIMI's argument is that exporters earned an average profit of barely Rs250 per tonne on account of poor infrastructure, duty, etc and there was no logic in blindly following Australia as the profit earned by miners there was about four times higher.

"If the move is implemented this will spell doom for legal miners here as the profit earned by them is barely up to Rs250 a tonne as compared to about Rs1,000 a tonne in Australia.

"Besides, here the sector is unorganised with 200 mines and infrastructure is dilapidated. There in Australia they have superb facilities and a handful of highly mechanised mines," FIMI's adviser SPS Chauhan said.

FIMI secretary general R K Sharma said under such a tax regime would lead to legal miners shutting shop when they no longer find operations profitable.
 

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