A booster dose of support for the mining sector is expected from the new government in its budget proposals to be presented around July 10.
Mining has been identified as a critical activity that needed a big push to help other capital intensive and employment generating industries. The sector has been braving a slowdown that has seen declining investment and production.
Informed sources here said that the mining package in Budget 2019-20 would revolve around allowing existing operations to flourish, while giving sops to boost new operations.
In this regard, all operational non-captive mines may be allowed lease extension of 10 years beyond 2020 with another 20 years extension to be considered beyond this period.
A high level committee set upon by the Niti Aayog is also evaluating the issue of extension of mining leases and is likely to submit its report to the new government soon after the ministers takes oath. This, sources said, would allow the proposals to be included in the forthcoming Union Budget.
Besides, a mining regulator would be set up at both central and state levels to regulate mining activity and prevent illegal mining from flourishing. Though the contours of the mining regulator would be finalised later, it is expected to be a ctwo-tier structure with the National Mineral Regulatory Authority at the Centre and state mining regulatory authorities to cover minor minerals at the state level.
In respect of extension of mining leases, the plan is to equate operations of captive, non-captive and mines controlled by government companies. While existing mining operations in captive mines can continue till March-end 2030, the same was proposed to end by March 31, 2020 for non-captive mines in the private sector.
Government companies were allowed extension of existing mining leases for 20 years at a time beyond the stipulated period of 50 years.
The government is set to change this by extending all private sector mining leases till March 31, 2020 and thereafter extending the lease for a further 20-year period. These changes would give a fresh lease of life to about 329 mines in 10 states that were facing closure by March next year under current regulations.
According to the sources, mining would also be given a level playing field by ending the reservation of areas for government entities. Also, areas that are yet to be developed by government companies can be put to auction for all interested entities in government and the private sector. P
A proposal is also being considered to allow the private sector in beach sand mining.
The mining package would also make it attractive for overseas investors to participate in mining activities in India. This would be done by allowing transfer of existing non-captive mining leases (granted other than by auction) in any merger and acquisition activity in the sector.
Besides, transfer of leases of captive mines would also be allowed without payment of 80 per cent royalty.
The package could also deal with lowering of taxes on the mining sector.
The effective tax rate in India is 64 per cent for existing mines and 60 per cent for new mines granted through auction. This compares with as low as 31.3 per cent in Mongolia and highest at 45.5 per cent in Indonesia, as per a report from Federation of Indian Mineral Industry (FIMI).
These taxes include corporate tax, CSR, dividend distribution tax, royalty, District Mineral Fund (DMF) and national Mineral Exploration Trust (NMET).
Inadequate exploration, need for investment to increase exploration activities, high level of taxes, royalty, license fee and environment and forest clearances remain a big hurdle for the mining sector in the country. The package would address a lot of these issues through fiscal and non-fiscal sops.
(Subhash Narayan can be contacted at email@example.com)
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