New Mining Bill to make industry uncompetitive: FICCI

Raising concerns over the royalty and profit sharing proposals of the new Mining Bill, industry body FICCI today said its implementation would make Indian mining industry uncompetitive globally as it will be charged with highest tax rates in the world.

"This means that the taxation rates in the mining industry in India would perhaps be the highest in the world. Such exorbitant levels of taxation would render the mining industry highly uncompetitive globally," FICCI said in its representation to the Prime Minister.

Seeking changes in the proposed law, the industry chamber said that tax incidence on coal will rise to over 61% from the current 47.7% post implementation of the new mining law.

For iron ore industry, the tax incidence would be about 55%, while for Bauxite miners, it will be as high as 110%, it added.

According to the proposals of Mines and Minerals (Development and Regulation) Bill, 2011, coal producers will have to share 26% of their profits with the project affected people through a District Minerals Development Fund.

For all other miners, the draft MMDR Act has proposed to levy an amount equal to the 100 per cent royalty payment with the affected people.

The draft law was approved by a ministerial panel, headed by Finance Minister Pranab Mukherjee, on July 7 and is now waiting for cabinet approval.

Talking about the financial implications of the proposals, Ficci's said that it will not only drive them to losses and subsequent closure, but even big public sector companies like SAIL, Coal India, NMDC's revenue and valuations would also be hit to a big extent.

Suggesting a different mechanism, Ficci said that instead of 100% royalty, either one time payment of 26% of the market value of land at the time of grant of mining lease could be charged or "a more reasonable level of 26% of royalty could be considered".

Stating that draft MMDR Bill seems to be inspired by BEE Act (Black Empowerment Act) of South Africa, the industry body said that growth of mining sector and actual capital expenditure in South Africa has declined significantly post implementation of the BEE Act.

The BEE requires companies to have ownership by historically disadvantaged South Africans at a level of 15% and is increasing it to 26% by 2014.

FICCI, in its representation, has also sought withdrawal of cess, which is proposed to be levied at two levels -- 10% as state cess and 2.5% as central cess.