Over a third of operating mines in Goa are set to be closed due to a recent decision by the state government to levy a 15 per cent upfront stamp duty on the royalty paid by them.
There are only 97 mines currently in operation out of 337 registered with the state government. Hence, around 70 per cent of registered mines are closed due to restrictions imposed by the state government following investigations by the M B Shah Commission inquiring into the legality of mines with required necessary permissions.
The closure of these mines assumes significance as the state is reeling under severe mineral crises with most small miners already shifting elsewhere for mineral explorations.
“Around 40 existing small mines with an accumulative annual exploration capacity of around 10 million tonnes (mt) are facing the threat of closure,” said Haresh Melwani, chief executive officer of H L Nathurmal and Co, a miner.
The draft mining bill, ready for submission in the state assembly, says mining leases for 337 registered mines expired on November 21, 2007. Prior to the date of expiry, the lessees submitted their applications for renewal or extension of the mining leases for a further 20 years. However, due to various factors, the government was not in a position to execute lease deeds for the purpose of renewal or extension till the state government passes an order. As a consequence, the government was deprived of a very large amount of revenue by way of stamp duty which otherwise would have been payable by the lessees on the renewal of mining leases.
It further says the government proposes to levy on every instrument of grant or renewal of a mining lease the stamp duty equivalent to 15 per cent of the amount of royalty that would accrue out of the annual extraction of minerals permitted under the environmental clearance.
According to an estimate, the state government is likely to fetch a total revenue of around Rs 2,500 crore through the proposed stamp duty levy.
Pukhraj Sethiya, manager, PricewaterhouseCoopers, said: “The India Stamp (Goa Amendment) Act 2012 proposes to impose a stamp duty of 15 per cent of the royalty to be accrued over the leases period and to be paid upfront within 60 days of the Act coming into force. This signified significant cost to miners. The amount will be roughly Rs 40-50 per tonne of iron ore resource in the lease area though the upfront amount to be paid will be in the range of Rs 1,000-1,500 per tonne of annual mining capacity, which is very high and will increase the total cost of production.”
In the current mining cost and price scenario (for iron ore) while miners have enough head room to absorb this extra cost, this may still result in higher prices for iron ore from the region, he added.
The stamp duty is a one time-upfront burden on miners which small miners with environmental clearance (EC) limit of less than 100,000 tonnes of annual exploration capacity would be difficult to bear as their price compared to the standard quality of iron ore remains lower and hence, they fetch lower revenue.
Adding to that is the 30 per cent export duty and the proposed MMRDA levies alongwith the recent levy of stamp duty, which would make small miners unviable, said Shivanand Salgaokar, president of the Goa Mineral Ore Exporter Association.
Goa produces around 90 million tonnes of iron ore mainly of lower grade between 55-58 per cent of Fe content for exports to China. The state contributes around 33 per cent to iron ore exports from India annually.