Mines Min seeks windfall tax to curb illegal iron ore mining

In a move to curb illegal mining, the Union Mines Ministry has asked the Finance Ministry to consider imposing a windfall tax on iron ore producers.

"We have proposed to the Finance Ministry imposition of windfall tax on sales of iron ore...  Beyond a reasonable limit (of iron ore prices), miners are making undue profit. This is adding to the dimensions of illegal mining," Mines Minister B K Handique told PTI.

Mines Minister B K Handique had last week reminded Finance Minister Pranab Mukherjee of an earlier proposal from his ministry for such a levy.

Such a tax, if imposed, will be an additional source of revenue for the government from mining, he said.

At present, the government taxes iron ore exports and also levies ad valorem royalty on the mineral. Asked if such a move will only be restricted to iron ore, a senior Mines Ministry official said, "At present, illegal mining of iron ore is the concern, so as of now yes. But let the detailed proposal be made. It might see many other minerals in the fold too."

The official said the Mines Ministry is seeking in- principle approval from the Finance Ministry to go ahead with the proposal. As and when such an approval is granted, a detailed study on the modalities of imposing windfall tax on iron ore companies will be prepared.

However, if such a levy is imposed, it may discourage iron ore exports and neutralise the Steel Ministry's hopes for doubling the export duty on the mineral, the official said. At

Present iron ore lumps attract 10 per cent export duty and iron ore fines 5 per cent.

Windfall tax is levied by governments against certain industries when economic conditions allow these industries to experience above-average profits.

Such a tax on iron ore is levied in countries like the UK, the official said.

In 2008-09, India exported about 106 million tonnes of iron ore on an overall production base of over 200 million tonnes.

The government is currently taking steps to curtail illegal mining in states like Karnataka and Orissa.