Tata Steel chief expects MMDR Act amendments to address minerals tax issue

Tata Steel MD T.V. Narendran

Tata Steel Managing Director  T V Narendran said that he expects amendments to the Mines and Minerals Development and Regulation Act (MMDRA) to address the current framework, which permits states with mineral reserves to levy taxes without limitation.

A recent Supreme Court (SC) ruling held that states have the power to impose taxes and levies such as cess on the land that the mineral is extracted from. This  introduces uncertainty for sectors reliant on mining to secure raw materials for their operations.

Tata Steel, which operates 10 mines in Odisha, has set aside over Rs 17,000 crore in contingent liability in its financial statements, released on July 31. However, it would be obliged to pay this only if the SC rules that states can retrospectively impose taxes on mineral extraction.

"It's not just a steel industry issue, I think the bigger issue is coal, because it will have a huge impact on the power sector and on power prices if each coal-producing state imposes its own taxes. It will have a cascading effect... I think the need to amend the MMDRA is clear to the government," Narendran told Moneycontrol in an exclusive interview on August 1.

The SC, on July 31, reserved its verdict on whether its judgment holding that states have the power to impose taxes on mineral extraction will be applicable prospectively or retrospectively.

"I think they (the government) are also waiting to see the complete judgment and its impact, and how to deal with it. It's a very big issue impacting the mining industry and anyone who is served by it, like  the steel, aluminium, cement, and power sectors. So, I expect that there will be some amendments (to the Act)," he added.

According to the Federation of Indian Mineral Industries (FIMI), India's mining industry faces the highest tax burden globally, with rates ranging from 45.9 to 49.9 percent.

This high tax rate results from substantial payments to the District Mineral Foundation (DMF), including a 30 percent royalty for mines acquired before the 2015 auction regime, and a 10 percent royalty for leases obtained through auctions.