In yet another blow to Odisha government's ambitious proposal to impose a windfall tax on “super normal profit” earned by miners, the Union Mines Ministry has said such a demand is not justified as all miners do not earn supernormal profit like state-run miner National Mineral Development Company (NMDC) .
“It may not be prudent to generalise that entire iron ore mining sector is earning profits to the scale equivalent to the NMDC, considering that it is a fairly large miner enjoying high grade deposits,” said Dinsha Patel, Union minister of state for mines.
“Since the FOB value (price at ports) would also include the cost of transportation and handling charges, on which royalty cannot be levied, it may not be appropriate to only see the FOB value of iron ore to come to the conclusion that super profits are being generated,” he added.
Iron ore fine exporters in Odisha sell the steel making ingredient at around Rs 3,000 per tonne at mines area, but charge a hefty Rs 6,500 per tonne for exports due to higher freight charges spent on transportation through both rail and road routes.
However, before the export boom, they were selling the fines at around Rs 500 per tonne, which is why the state government had pitched for imposing a super normal profit tax in line with Australia, so that the tax income would be spent for the development of areas surrounding the mines.
The Union minister, in his reply said, the Australian tax is not meant for provincial exchequer. Besides, he argued the upcoming Mines and Minerals Development and Regulation Bill has proposals for miners’ contribution, equivalent to royalty paid on minerals, that would go to District Mineral Foundation in mining areas.
Odisha has been earning higher royalty from mineral exploitation even as production has gone down marginally. So to develop the mineral bearing areas, the state needs to ensure effective mechanism for sharing the royalty revenue such as including mining lease holders in the process, suggested the minister.
Passing the ball to state government's court, the minister has said, rather than demanding higher royalty revenue, the state should focus on clearing pending mines lease proposals to increase the state revenue.
“The state government has been slow in disposing 3,612 pending applications for grant of mineral concessions lying with the state mining department (as on December 2011). This is an area of serious concern,” Patel said in his letter to the Chief Minister Naveen Patnaik.
“I would request you to urgently review the steps taken for mineral development in your state considering the fact that mineral sector in Odisha has a potential in the near future to contribute substantially to the state GDP,” he added further.
Patnaik had first proposed for imposing a windfall tax on miners in November last year and then again in January this year.
