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High taxes to hamper mining sector growth: SAIL chairman

Indian mining is a highly-taxed sector with taxes comprising 45% of the value of the output as compared to 25-30% in other countries

BS Reporter Hyderabad
Higher taxes in the mining sector is going to be a major challenge in ramping up the domestic production in important areas like iron ore and coal, which is a must for meeting future demand from steel industry, according to CS Verma, chairman of Steel Authority of India Limited (SAIL) and chairman and managing director NMDC.

This comes on top of a massive investment of $ 210 billion required to be made just in the steel sector to  increase the capacity to 300 million tonne to meet that much demand expected by 2025 from the present  90 million tonne capacity, he said on Saturday.

Indian mining is a highly-taxed sector with taxes comprising 45 per cent of the value of the output as compared  to 25-30 per cent  in other countries. This will further go up to the 60 per cent level of the total production when the proposed Mines and Minerals (Development an Regulation) Act comes in to effect, according to him.

While the steps like large capacity mechanised mines, maximising the usage of iron ore fines and alternate technologies are required to expand the production capacity in the mining sector, the massive investment requirement in the steel industry needs a dedicated financial institution on the lines of Power Finance Corporation in power sector projects, he said.

Iron ore requirement will be in the order of 400 million tonne, while the present production stands at 150 million tonne, which had gone up to the 225 million tonne level when the exports were in full swing.

Of this, NMDC has a production capacity of 32 million tonne and is currently producing 29-30 million tonne while the rest is in private sector. Verma said this capacity would be increased to 50 million tonne in the next three years at an investment of Rs 4,000 crore at the production level. Similarly, SAIL proposes to increase the steel production capacity to 25 million tonne in the 12 th Plan period and to 50 million tonne by 2025.

It was the lack of evacuation facilities that are slowing down NMDC from increasing the production capacity, he said while adding that these facilities had to be created in public-private participation mode.  

“The problem today in NMDC is not about production. W can produce 35 million tonne with the same capacity if  we chose to run the operations in three shifts. My problem is evacuation. We can not take out the production as there is not enough infrastructure to evacuate the ore from the mine site,” Verma said.

The company had left out very valuable assets in other countries only because there was no infrastructure to mine and shift the ore to Indian shores, according to him.

The public sector iron ore miner had advertised for a second slurry pipeline to carry iron ore from Kirandul in Chattisgarh to Vizag Steel Plant in Visakhapatnam and is expected to take another six months to award the project, according to him. A double lining of the existing railway track to increase iron ore evacuation from Chattisgarh is also under progress, he said.

4-5 foreign coal assets on ICVL’s list
International Coal Ventures Ltd, a venture of public sector companies that includes NTPC, Steel Authority of India (SAIL) and NMDC for acquiring foreign coking coal reserves, has identified four-five assets, Verma said. He did not disclose the names of the assets since they were bound by confidentiality clauses.

He added the joint venture’s board would meet later in the day here to take a call on the acquisitions.

“I consider this as an opportune time to go for the buyouts, with valuations down by half because the international coal prices have come down to less than $150 a tonne from a peak of $300 a tonne a couple of years ago,” he said.

For the 12th Plan period, NMDC has a Rs 30,000-crore capex plan outlay while SAIL has a capex outlay of Rs 50,000 crore. Sail had spent about  91 per cent of the Rs 11,000-crore funds earmarked for the current year, according to him.

Responding to a question he said two-thirds of the investment would come from internal accruals and the remaining would be raised through borrowings in SAIL. This ratio would become 50;50 when it starts planning for the targets set for the year 2025, according to him.

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First Published: Dec 15 2013 | 8:27 PM IST

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