Orissa, which has over 35 per cent of the country's iron ore reserves, has urged the Centre to impose a Mineral Resource Rent Tax on iron ore to ensure that huge profits earned from mining are not concentrated in the hands of a few merchant miners.
In a letter to the Prime Minister Manmohan Singh, Chief Minister Naveen Patnaik has made a strong bid for the introduction of the tax at the rate of 50 per cent of the surplus rent earned by the miners.
"The Australian government has announced that a Mineral Resource Rent Tax of 30 per cent on iron ore will be applicable from July 1, 2012. On the same lines, a Mineral Resource Rent Tax should be levied on iron ore to be charged at 50 per cent of the surplus rent and should accrue to the states. As and when surplus rent decreases the tax will automatically decrease,” Patnaik has said.
Patnaik has argued that the additional royalty will enable the state to invest in infrastructure and jobs to give the community a lasting stake in the prosperity of areas affected by mining.
Moreover, by reducing the incentive for excess production from mining leases in violation of statutes and rules, it will ensure conservation of finite resources.
The tax will also ensure that profits from the state resources are used for the well being if the community and super normal profits are not made by a few individuals or companies which are engaged in merchant mining.
Patnailk said, the insatiable demand for iron ore in the export market has made this ore a highly profitable commodity with returns from mining being far in excess of economically acceptable rates.
Stating that iron ore prices have increased more than ten-fold in less than a decade, generating windfall gains for the miners far exceeding the level of investment or risk involved in the activity, Patnaik has said that it has led to a situation where the mine owners are benefiting beyond any measure of reasonable return even though the state is the owner of these resources.
He pointed out that these surplus profits should accrue to the state and can be utilized for improving social and physical infrastructure and strengthen welfare measures besides improving livelihoods of people of the state.
