Iron ore miners' contribution to DMF seen at Rs 1,530 cr: Ind-Ra

The new iron ore miners' contribution regulations notified last week will see miners coughing up around Rs 1,530 crore to the district mineral foundation (DMF), says a report by India Ratings.

The DMF is a corpus collected from miners to be used for the welfare of the people affected by mining.

Under the DMF scheme, high priority areas like drinking water supply, healthcare, sanitation, education, skill development, women & child care, welfare of the aged and the disabled, and environment conservation will get at least 60% share of the funds.

Rest of the funds will be used to create a supportive and conducive living environment, by building roads, bridges, railways, waterways, irrigation and green energy.

The government had last week notified miners' contribution to the DMF, which said the miners who were awarded leases before January 12, 2015 will have to contribute 30% of the royalty to the DMF, while those given after January 12, will deposit 10%.

The government fixed DMF contribution at significantly lower value compared to the earlier maximum limits, thus offering a great relief to miners, especially in the backdrop of weak steel prices, the domestic rating agency said.

The agency estimates the total contribution to DMF from the iron ore miners to be nearly Rs 1,530 crore. The funds generated by DMFs would be used for the welfare of the people affected by mining related operations under the Pradhan Mantri Khanij Kshetra Kalyan Yojana.

The report said the impact of the new DMF contribution on miners will be in the range of Rs 153 to Rs 465 a tonne assuming a royalty payout of 33 to 100%.

However, under the new norms, royalty payout will now come down to Rs 100 a tonne under the new DMF norms and also due to the decline in the notified price of iron ore lumps and fines (to the tune of 8-18% over March 2015-June 2015), by the Indian Bureau of Mines.

Additionally, the DMF contribution has to be made from the date the new norms coming into effect (January 2015) and not retrospectively.

The lower royalty payout under DMF and the imposition of the recently imposed 20% safeguard duty on hot-rolled coils, is expected to benefit steel producers who are reeling under a stressed credit profile given muted demand growth, low capacity utilisation and significant imports, the report said.

The anti-dumping duty on HR coils from China will be costlier compared to domestic steel prices by Rs 2,000 per tonne.