Monday, 2 January 2017

Taxes leading to reduced GDP from mining: Sanjay Pattnaik

At the annual general meeting of Federation of Indian Mineral Industries (FIMI), Sanjay Pattnaik, Executive Director of Tata Sponge Iron (TSIL), was elected as the national president of the body.
An excerpt from his interview in the meeting:
What are the challenges before the industry?
Mining involves numerous stakeholders, and hence, its revival depends on strong coordination not only between miners and the government, but also among the state and central governments.
Foremost of all, the annual cap of 30 MT imposed by the Supreme Court needs to be removed to allow the industry to grow.
India has the highest tax rates on minerals in the world. Effective tax-rate, the ratio of value of all amounts paid to the government to value of profits before taxes, is approximately 69% for operating mines in India compared to resource-rich nations like Canada (34%), Australia (40%), and South Africa (40%).
In addition to royalty, miners have to make several other payments such as DMF (30% on royalty for existing mines and 10% on royalty for auctioned mines), NMET-National Mineral Exploration Trust (2% on royalty), service tax (15% on royalty), sales tax, environment and forest levies, and other cess/taxes by local institutions, panchayats, etc.
These taxes make the domestic raw materials costly and unviable for manufacturing, leading to imports and reduced GDP from mining.
In another interview with the beach mining tycoon, Vaikundarajan, the MD and CEO of the largest beach mining company in India - V. V. Minerals, he had echoed the same thoughts. Obviously, even the beach and sand mining companies face the same issues with the policies of the government.

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