Captive miners resent 30% DMF levy

Say the notification has come as a huge setback to such lessees who have pumped in thousands of crores of investments at their end use plants

Captive miners have taken exception to the recent notification of the Union government mandating contribution to the District Mineral Foundation (DMF) at the rate of 30 per cent of the royalty by all miners who were awarded leases before January 12, 2015.

The captive leaseholders argued the notification has come as a huge setback to such lessees who have pumped in thousands of crores of investments at their end use plants and were passing through a rough patch. In contrast, the merchant miners were positioned better to pay the levy since they made profits.

"The DMF is going to be an additional burden, especially for the captive miners who have invested thousands of crores on adding value. The DMF Rules should have been made applicable only to the merchant miners. The levy would have a negative impact on end use industries like steel who are already incurring losses. Besides, the existing royalty rate in India at 15 per cent (ad-valorem) is already the highest compared to the world average of three to seven per cent", said Manish Kharbanda, executive director and group head (mines & minerals), Jindal Steel & Power Ltd (JSPL).

He rued that the situation is worse in Odisha where the royalty is charged at the highest rate even on the lowest grade of ore.

"Most of the miners in the state end up paying the royalty at the highest rate. The state government needs to act swiftly and charge royalty as per the established statutes since they have already lost their case in the Revision Authority (under Union mines ministry)", said he.

Though a few industry associations had pleaded for differential DMF rates for captive and non-captive leases, their case proved to be of no avail.

The Federation of Indian Mineral Industries (Fimi) feels contribution to the DMF would jack up raw material prices significantly.

"The cost of finished products would go up. Imports would become cheaper. Ultimately, it is the end consumers who will suffer", said R K Sharma, secretary general, Fimi.

"Most of the steel and DRI plants- even those with captive leases are making cash losses. In contrast, the merchant miners have lot of profit margins and have enough cushion to absorb this additional levy (to DMF)", said N D Rao, president, Pellet Manufacturers' Association of India (PMAI).

Rajdeep Mohanty, resident director at Jindal Stainless Ltd (JSL) said, "The 30 per cent levy to DMF for existing leaseholders is quite steep. The additional levy would make operations unviable for steel producers unless demand for finished products goes up. For the merchant miners, the going would be tough but they would still be able to recover their cost."

As per the DMF notification by the Central government, all miners who were awarded leases before January 12 this year need to contribute an amount equal to 30 per cent of the royalty rate. Those who have bagged leases later would deposit 10 per cent to the DMF.