Mines ministry for closer scrutiny on Orissa's windfall tax proposal

Even as the Orissa government has made repeated appeals for imposition of Mineral Resource Rent Tax on windfall gains made by miners, the Union mines ministry has emphasized on a close scrutiny on the issue to establish whether the mining industry is earning any super profit.

The ministry besides admitting that iron ore prices have shot up from $69 a tonne in April 2007 to $145-150 a tonne in October 2011 has also pointed out that incidental costs like transportation and handling charges have also increased during the same period in the country.

“That the iron ore mining industry is earning profits cannot be disputed but whether it is earning super profit to the detriment of the state government is an issue that needs closer look, especially in Orissa where mining infrastructure is poor. This issue would be taken up by the study group on royalty and dead rent where the Orissa government is also a member,” Union minister of state for mines Dinsha Patel has said in a letter to Chief Minister Naveen Patnaik.

Patel said, the Government of India has introduced a new Mines and Minerals (Development & Regulation) Bill-2011 in the winter session of the Parliament which would entail that apart from royalty, every miner would be required to pay a sum equal to royalty to a district level mechanism for payment of annuity to the local population affected by mining and local area development.

According to this new Bill, the state governments can levy a cess at the rate of 10 per cent of the royalty amount for the minerals mined.

“Considering that the Orissa government does not have any policy at present to allocate royalty to the local government, I am of the opinion that the proposed mechanism in the draft MMDR Bill for inclusive growth would effectively address your concerns, especially considering the fact that historically higher royalty earnings per se has not converted into improving the livelihoods of the people,” Patel stated in the letter.

This mechanism, the minister opined will hep reduce excess profits of the mining companies and at the same time provide resources to the state governments to undertake various developmental activities at the grass roots level in the areas in and around the mining areas.

Stating that Orissa is yet to harness its mineral resources for benefit of its people in the mining districts, the minister has underscored the need for ensuring scientific, systematic and sustainable mining, adding an reduction in mining activities would only stymie the growth of the emerging mineral sector.

He emphasized that much of the mineral potential areas in Orissa still need exploration and prospecting to assess mineral resources available for scientific mining.

To this purpose, the Union mines ministry has requested all state governments to impose special condition under Rule 27 (3) of the Mineral Concession Rules-1960 in all mining leases for completion of such resource assessment through exploration in a timely manner.