Odisha to revisit plan to impose forest tax on miners

Proposed FDT has provision to collect 15% of sale value of minerals produced from forest area

The Odisha government has asked the forest and environment department to re-examine the proposal to impose Forest Development Tax (FDT) on mine owners in a bid to pre-empt any legal hurdle in implementing the levy.

“As earlier attempts to impose taxes on miners have been blocked by courts, the government is trying to make sure that the FDT proposal passes the legal test, should anybody challenges it in a court,” said a source close to the development.

According to government sources, the chief secretary has reportedly returned the proposal to the forest and environment department for further consultation on its legal validity.

The proposal seeks collection of FDT at the rate of 15 per cent of sale value of minerals produced from the forest land. It has been pending for approval since 2011. The government intended to use the money to create green cover in the area denuded by mining.

The FDT would be collected over and above the Net Present Value (NPV) of trees on the lease area, paid by miners to the state via a central government fund for afforestation purposes. The miners also pay royalty to the state government for extracting mineral using its territorial land, apart from payment of surface rent and other dues.

The state government is worried that the miners might challenge the levy of FDT in courts questioning its legal validity as they have been paying the dues in several ways. The forest and environment department has been asked to make further consultation with the law department and steel and mines department to put forth a sound proposal, which does not contradict with the provisions mentioned in mineral acts. The Odisha model of FDT follows that of Karnataka, which had levies 12 per cent tax on mining firms that undertook mining activities in forest areas. It was opposed by several mining companies there and was challenged in the court. However, the notification was upheld by the Karnataka High Court.

Earlier, the Odisha government had estimated that it would mop up Rs 1,000 crore additional revenue by imposition of the FDT. However, with limited mining activity in forest areas in the state, the government is having second thoughts about whether the tax proposal would actually rake in Rs 1000 crore.

“Following restrictions imposed by the state government, there is very limited mining in forest areas. Mineral production from forest areas has been declining,” said the source.

Name of the proposal/Act	Provision	Status
Mineral Rent Resource Tax	50% tax in super normal profit	Rejected by Union Government
Stamp Duty Act (amended)	Duty to be collected despite non-renewal of mining lease	Stayed by Odisha High Court
Orissa Rural Infrastructure and Socio-Economic Development (ORISED) Act, 2004	A cess of between 5 and 20 per cent for different minerals	Quashed by Odisha High Court
Surface rent	To collect Rs 3,000 to Rs 10,000 per ha for land not accessible for land revenue instead Rs 10 earlier	Approved by state cabinet
Odisha (Scheduled Areas) Development of Mineral Bearing Area Regulation, 2013.	To collect money equal to  royalty payment to a fund for peripheral development in tribal areas.	Draft proposal ready
Forest Development Tax	To collect 15% tax on sale value of minerals raised from forest area	Pending for approval