Tweak in mineral concession rules may ease liquidity, but industry needs more reforms: Experts

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Amendments proposed to mineral concession rules would improve the liquidity of distressed miners, but issues such as royalties and double taxation loom as sore points.

The government proposes to reduce the interest rate for rent, royalty or fee payments to states to 12 percent from 24 percent on charges due under the Miners and Minerals (Development and Regulation) Act, 1957.

“Halving the interest rate makes little difference for the listed players like JSW Steel and JSPL in the current interest rate scenario as these players wouldn’t default and could easily source funds at the rate of 7- 8 percent,” said Rakesh Arora, commodity expert and managing partner at Go India Advisors.

The government also proposes to remove the deadline of 60 days for payment of rent, royalty or fees. State governments will be allowed to charge simple interest on any such dues under the terms and conditions of any prospecting license or mining lease from the 60th day of the expiry of the deadline fixed by the governments for such payments.

This, according to Aruna Sharma, former steel secretary, would enable states to give a longer duration to genuinely distressed and small miners for making the payments and would help improve their liquidity.

She added that while this is an effort in the right direction, more needs to be done in form of rationalization of royalties and double taxation, which is presently under discussion.

In the current statutory framework, royalty is included in the average selling price of minerals and it is then computed on an ad valorem basis, leading to double taxation.

It has been proposed to form a committee to examine the issue. Ad valorem duty is tax or customer duties proportionate to the estimated value of the goods or transaction concerned.

The government has been incrementally working towards reforms in the mines and minerals space.

The government had been expected to amend the Mines and Mineral (Development and Regulation) Act in the monsoon session of the Parliament but it didn't take up the matter for discussion.