Levy windfall tax on super-profits of miners: Naveen

Mineral-rich Orissa, which has over 35 per cent of the country’s iron ore reserves, has urged the Centre to impose a Mineral Resource Rent Tax on iron ore to ensure the super-normal profits earned from mining were not concentrated in the hands of a few merchant miners.

Making a strong bid for introducing the tax, chief minister Naveen Patnaik has sought the intervention of Prime Minister Manmohan Singh, stressing the need for fixing the levy at 50 per cent of the surplus rent .

“The Australian government has announced a Mineral Resource Rent Tax of 30 per cent of iron ore from July 1, 2012. A similar tax should be levied on iron ore, at 50 per cent of the surplus rent and should accrue to the states. As and when surplus rent decreases, the tax will also decrease automatically “, Patnaik said in a letter to the PM.

Patnaik argued the additional royalty would enable the state to invest in infrastructure and jobs, giving the community a lasting stake in the prosperity of areas affected by mining.

Moreover, by reducing the incentive for excess production from mining leases in violation of statutes and rules, it will ensure conservation of finite resources.

The tax will also ensure that profits from state resources were used for the well-being if the community and super-normal profits were not made by a few individuals or companies engaged in merchant mining, thus ensuring equity.

Patnailk said the insatiable demand for iron ore in the export market had resulted in iron ore becoming a highly profitable commodity, with returns being far in excess of economically acceptable rates.

Stating that iron ore prices had increased more than ten-fold in less than a decade, generating windfall gains for the miners which far exceeded the level of investment or risk involved in the activity, Patnaik said it had led to a situation where the mine owners were benefiting beyond any measure of reasonable return, even as the state was the owner of these resources.

He pointed out these surplus profits should accrue to the state and could be utilized for improving social and physical infrastructure and strengthening welfare measures, besides improving livelihoods of people of the state.