As miners struggle to get into the groove after the blow dealt on their operations by Covid-19 pandemic, they have sought respite from mandatory Capex (capital expenditure) commitments mandated in the new regulations.
With the fear of Coronavirus still lingering in the minds of workers, mining companies are finding it immensely difficult to reengage them. Lack of adequate workforce has cast a cloud on the future of mining operations. None of the merchant mines in Odisha whose lease validity expired by March 31, 2020 has been able to recommence any mine related activity. Though the successful bidders have got Letters of Intent (LoI), they are awaiting the grant of formal vesting orders from the state government to extract minerals.
What has compounded their woes is depleting demand from end use industries. Amid these unfavourable circumstances, miners are constrained to pledge Capex commitments on their operations.
“For new regulatory compliances, there would be many Capex requirements like for illumination, heavy earth moving safety requirements as per MMR (Metalliferous Mines Regulations) 2019. Also there are many circulars brought out in the last two years by DGMS (Directorate General of Mines Safety), IBM (Indian Bureau of Mines), etc. where Capex will become mandatory in the mines. This requirement of Capex can be withheld till the next financial cycle. The government should grant necessary relaxations in this regard”, said R K Sharma, secretary general, Federation of Indian Mineral Industries (Fimi).
The relaxation by the government is expected to cushion the mining sector from the financial stress it’s facing after the onset and spread of Covid-19 pandemic.
In its submission to the Ministry of Finance, Fimi has called for waiver of Integrated Goods & Services Tax (IGST) or reducing it to five per cent on imports made under Export Promotion schemes. Being a highly capital intensive industry, mining requires import of specialised heavy machinery. However, with the advent of GST, imports of IGST are taxed in the range of 18-28 per cent.
The mineral lobby body has also advocated rationalisation of GST on royalty. Presently, 18 per cent GST is levied on the royalty amount while five per cent is charged on sale of minerals. Fimi has suggested that GST on royalty needs to be scaled down to five per cent to bring it at par with the rate on sale of minerals. The uniformity in tax rates would help raise operational productivity and ensure environmental sustainability through efficient machinery procurement.
For ensuring economic viability of mining operations, Fimi has suggested that Railways should extend 50 per cent discount in outbound freight of exported minerals /mineral products to ports and inbound freight of raw material utilized to produce the exported goods for the period of six months plus one month. Moreover, priority should be given to cut railway freight for transportation of minerals and metals.
“This will result in companies reaching to the farthest area possible resulting in sustainable output till the time demand revives fully. It would also minimise human interface,” Sharma said.