New iron ore tax proposal draws flak from Opposition, traders

The Orissa government‘s proposal to impose additional tax on iron ore has drawn flak from a spectrum of stakeholders ranging from iron ore miners, exporters to opposition political parties.

While traders said, curbing mining profits will stop further exploration of the mineral and use of costly, but eco-friendly ore raising techniques, political parties said it is just another government gimmick lacking any seriousness to augment revenue for investment in development of the local community in mining area.

“The miners have been making money since 1998. The state government did not point a finger then because it was hand in gloves with the miners. Now it is trying to show that this government is not with the miners, but with the people,” said Niranjan Patnaik, president of Orissa Congress.

BJP leader Juel Oram said, the government lacks political will to develop basic infrastructure in the mining areas and this move will no way ameliorate the plight of the mining rich regions.

Chief Minister Naveen Patnaik , through a letter to the Prime Minister Manmohan Singh, has proposed imposition of a Mineral Resource Rent Tax on iron ore at 50 per cent of the surplus rent arguing the need for appropriation of a part of the huge profits made by miners for development of the local community in mineral-rich states.

Currently, the states get 10 per cent royalty on iron ore.

The state government’s proposal was made in line with Australia where a new, increased tax on coal and iron ore will be applicable from July 2012.

Iron ore miners opposed the government proposal saying it would hurt further development in mining industry.

“It is a negative thing for mining industry and mineral resources. If our profits dip, then we would not like to invest huge money in systematic and eco-friendly mineral exploitation. We would also like to limit our exploration for undiscovered ore deposits,” said an official of a large mining company.

Many traders, exporters termed the move as part of the government’s anti-export policy.

“This (proposal) has been introduced mainly to curb exports. If the government is keen to stop exports, then it should give the exporters and traders exclusive permit to use the ore to make pellets, which can be used in local steel mills,” said Sujit Dey, general manager of iron ore export firm Cargo Resourcing and Exports Private Ltd.

To support local steel industry, the Central government raised iron ore export taxes fivefold to 20 per cent this April.