Windfall tax on miners proposed

On the heels of Australia announcing a 40 per cent tax on bumper profits of miners, India said it proposed a similar windfall tax on iron ore.

“We have already moved the finance ministry...We are for it (windfall tax). We have sent the letter,” Mines Minister B K Handique said.

He said the move, initiated after Australia announced such a tax on miners, would not only deliver ‘justice’ to locals in mining areas through corporate social responsibility (CSR) but would also check rampant illegal mining.

Australia proposed the tax in May after prices of iron ore and other commodities jumped on demand from countries like China. Windfall tax is levied by several countries on some super profit-making industries.

But, the Federation of Indian Mineral Industries (Fimi), said the move would cripple miners, as their profits were barely Rs 250 a tonne compared to about Rs 1,000 a tonne in Australia.

“CSR has to be maintained and all merchant miners have to pay,” Handique said, adding such a tax would be an additional source of revenue for the government.

About 50 per cent of India’s domestic iron ore production is exported. Exports have nearly tripled over the last decade from about 38 million tonnes (mt) in 2000-01 to about 106 mt in 2008-09. The country produced 215 mt of iron ore in 2008-09.

At present, the government levies 15 per cent export duty on iron ore lumps and 5 per cent on the fines variety.

Handique said though Fimi has opposed the move, another industry body, the Indian Chamber of Commerce, supports the windfall tax, a levy generally intended to prevent reckless exploitation of natural resources and curb profiteering.

“If the move is implemented, this will spell doom for legal miners here as the profit earned by them is barely up to Rs 250 a tonne as compared to about Rs 1,000 a tonne in Australia. Besides, here the sector is unorganised with 200 mines and infrastructure is dilapidated. In Australia, they (miners) have superb facilities and a handful of highly mechanised mines,” Fimi’s advisor S P S Chauhan said.