Odisha expects to mop up Rs 1000 cr from forest development tax

Odisha expects to get additional revenue of Rs 1000 crore from the proposed forest development tax (FDT). The FDT is set to be levied at the rate of 15 per cent on sale value of minerals raised on forest land.

"The finalization of FDT will need an inter-departmental consultative process involving the departments of forest & environment, steel & mines and law. The FDT Act has to be amended. There is a possibility of showing minerals raised from forest land as non-forest produce as 200 out of 600 mining leases have a mix of forest and non-forest land. A mechanism has to be worked out to check this”, a top official source told Business Standard.

Presently, FDT is levied on three items- timber, bamboo and kendu leaves.

A team of officials of the departments of steel & mines and forest & environment had recently visited Karnataka to study the modus operandi of the proposed tax which is already in vogue in the iron ore rich southern state.

The team has submitted its recommendations which are currently under scrutiny of the forest & environment department.

Though the FDT model has not been decided yet, an earlier note by steel & mines department said the tax could be imposed on the basis of sale value of the mineral. The IBM (Indian Bureau of Mines) sale value is available for iron ore, chrome ore and manganese which could be the sale value for calculation of tax.

However, for bauxite and many other minerals, the same is not available and a mechanism will have to be devised for assessing the sale value. The law department is set to furnish its considered views on whether FDT can be levied by the state forest department on minerals since the same is not permissible for states under Section 2 of Mines and Minerals (Development & Regulation) Act-1957.

Earlier, the steel & mines department had informed the department of forest & environment that it has no objection to the FDT proposal.It may be noted that the Karnataka government, through a notification in 2008, had levied FDT at 12 per cent on firms that undertook mining activities in forest areas. The FDT was opposed by several mining companies which had challenged the imposition of such a tax. However, the notification was upheld by the Karnataka High Court.

The proposal for FDT by the Odisha government comes close on the heels of the demand for Mineral Resource Rent Tax (MRRT) made by the state to the Centre. Chief Minister Naveen Patnaik had urged the Government of India to impose MRRT at the rate of 50 per cent on windfall gains made by miners.