Profit-sharing to cost miners Rs 15,000 cr: Ficci

The government’s decision to make it mandatory for domestic miners to share their profits would hit the domestic industry by an estimated Rs 15,000 crore every year, around 7.5 per cent of the overall Rs 2 lakh crore worth of minerals produced in the country in the financial year ended March 2011.

Miffed at the decision, industry chamber Federation of Indian Chambers of Commerce and Industry (Ficci) has decided to make a presentation to the government next week listing its concerns over the benefit-sharing proposal and other major provisions in the new Mines and Minerals Development and Regulation (MMDR) Bill, 2010.

“As per our estimate, the profit sharing and royalty sharing provision of the new mining Bill will have an overall impact of around Rs 15,000 crore on miners. This cost, which is in addition to the surface rent and other annual compensations like central and state cess, is going to be prohibitive,” said Anand Goel, a member of Ficci’s mining committee, after the panel met to discuss the issue.

The Rs 15,000-crore cost of local compensation includes Rs 2,800 crore to be shared annually by coal miners, and the remaining Rs 12,200 crore will be shared by non-coal miners. Goel also added that the decision, if finalised, would leave no employable funds for companies. “In addition, increasing the foreign direct investment (FDI) inflow into the sector would become difficult.”

Earlier this month, a 10-member Group of Ministers (GoM) headed by Finance Minister Pranab Mukherjee had approved a draft of the amendment to the MMDR Bill.

As a result, it becomes mandatory for coal miners to share 26 per cent of their profits with local population as a compensation for damage to the local environment.

Companies operating in the mineral sector other than coal would have to share an amount equal to the annual royalty paid by them, according to the new Bill.

“Mining in India is already the most highly taxed sector globally with an overall effective tax rate of 43 per cent, as compared to tax rates between 35 and 40 per cent in major mining countries. In India, it will be more than 60 per cent after the new provision is implemented,” said Tuhin Mukherjee, chairman of the Ficci mining committee.

The chamber, in its presentation to the government, would point out the difficulties in implementing the benefit sharing proposal including those associated with calculating profits of individual mines of a company located in different states separately. It will also demand royalty sharing in the coal sector, as against profit sharing decided by the GoM. The Bill is likely to be introduced in the upcoming monsoon session of Parliament, after it is approved by the Union Cabinet.