Royalties included in mining law to limit growth potential of iron ore industry: Fitch

Although the MMDR law will support iron ore output growth, the royalties included in the Act will limit the overall growth potential of the sector, Fitch Solutions said.

The government last month promulgated an ordinance for amendment in the MMDR Act 1957 and the CMSP (Coal Mines (Special Provisions) Act, 2015, a move aimed at enhancing the ease of doing business, among others.

Although the Mines & Minerals (Development & Regulation) MMDR Act will support ore output growth, the royalties included in the Act will limit the sector's overall growth potential, Fitch Solutions said in a statement.

"As part of India's 2016 Union Budget, export duties for iron ore lumps and fines below 58 per cent Fe content were reduced to nil from 30 per cent and 10 per cent respectively. This reduction was aimed at boosting shipments from the western state of Goa where the Supreme Court lifted an earlier iron ore mining ban," the rating agency said.

However, the decision by the apex court to cancel all iron ore permits in Goa in February 2018 will mean that production from that state is likely to head lower rather than increase, it said.

"As a result, we forecast India's iron ore output to grow from 219 mnt (million tonne) in 2020 to 243 mnt in 2029. This represents an average annual growth of 0.6 per cent during 2020-2029, greater than the 1.9 per cent Y-o-Y growth witnessed over 2010-2019," it said.