Karnataka Governor's Office returns Mineral Bill seeking 'clarification', shares of NMDC, Sandur surge

The Karnataka Mineral Rights Bill had provides for retrospective tax and mining activities, after a Supreme Court order last year.

The Karnataka Governor's Office has returned the Mineral Rights Tax Bill 2024, seeking 'clarification' from the government, reported CNBC-TV18, a development that sent share prices of major miners Sandur Manganese and NMDC sharply higher on January 23, while Vedanta is off lows of the day.

Governor’s decision follows concerns raised by mining associations in the state regarding certain clauses in the bill.

The Karnataka Mineral Rights Bill had provides for retrospective tax and mining activities, after a Supreme Court order last year, which approved states to collect mining taxes retrospectively from 2005.

Earlier this month, The Economic Times had reported citing people familiar with the development that Centre is exploring legal options to soften the impact of fresh mining taxes in Karnataka on major miners, following concerns raised by industry participants. Steel Minister HD Kumaraswamy and Law Minister Arjun Ram Meghwal had reportedly discussed legislative options at disposal to counter the impact, said the report.

Steel Minister Kumaraswamy had on January 9 said that additional taxes on miners in Karnataka would have a negative impact on the growth of the sector, as well as the steel industry.

The Karnataka (Mineral Rights and Mineral Bearing Land) Tax Bill, 2024, provisions for levy and collection of tax on exercise of mineral rights as well as on mineral-bearing land by the State government. The proposed law is expected to bring revenue of Rs 4,208 crore, and tax on land-bearing minerals would fetch over Rs 500 crore a year. The Bill proposes to levy a tax from Rs 20 to Rs 100 per tonne for different minerals.

As per analysts, the proposed taxes will narrow the cost deficit between auctioned and pre-auction mines. While NMDC faces a cost increase of around 22%, private miners are staring at a 45% increase in cost rise, which means volumes may shift from private players to NMDC, the largest PSU miner.

Karnataka forms nearly 35% of the total mix for NMDC's mining output, and JSW Steel sources major quantities of iron ore from NMDC. Vedanta and Sandur Manganese are the two major iron ore producers from Karnataka.

The industry has echoed concerns that more states may follow Karnataka’s footsteps if the lesiglation goes through, which may mining operations costlier.