By Ajoy K. Das
With the COVID-19 pandemic bringing the Indian mining industry to a grinding halt, miners across the country have sought a bailout package for survival of the industry.
“The spread of COVID-19 has created an extra-ordinary and unprecedented situation in the Indian mining industry. The mining industry had been under severe stress even before the pandemic and now challenges from the pandemic have brought the industry to a grinding halt,” Federation of Indian Mineral Industries (FIMI), the apex mining industry representative body, said in a petition to the government.
“It is imperative that for survival of the industry, which is at the heart of infrastructure development, required relief and stimulus is extended enabling its continued operation,” FIMI said.
The impact of the pandemic and the national lockdown, extended twice since first imposed on March 24, has been such that the stockpile of iron ore across producing eastern states of Odisha and Jharkhand has amounted to 162 million tons.
On one end, domestic steel mills have reduced their plant capacity utilizations to the levels of 30%-50% since the national lockdown and triggered sharp off-take of raw materials, and the 30% export tax levied on iron ore shipments overseas is not finding many takers in international markets either.
The domestic mining industry has sought immediate scrapping of the export tax levied on iron ore with FE content of 58% and higher to enable miners to be more competitive in international markets and rapidly reduce stockpiles, lower carrying costs and improve cash flows.
At the same time, FIMI has petitioned scrapping the 15% export tax on non-plant grade bauxite, pointing out that every other major exporting country like Australia, Brazil, Malaysia had a nil rate while Guinea had a nominal rate of 0.75%.
The imposition of the export tax was largely responsible for declining of bauxite exports from India, from a peak of 8.91 million tons in 2015-2016 to a meager 500,000 tons in 2019-2020. This despite India ranking sixth in global ranking in terms of bauxite resources estimated at 3.896 billion tons.
According to the Indian body, not only is the country self-sufficient in bauxite resources, all domestic alumina and aluminum producers have their own captive bauxite mines. On the other hand, much of the bauxite deposits in the western part of the country were of low alumina content ranging 38%-45% and high silica content of above 7%, and not used by domestic smelters and refiners.
In order to lower the cumulative incidence of various taxes on miners, FIMI has sought that contributions to the District Mineral Fund (DMF) should be treated as a miner’s mandatory spend on Corporate Social Responsibility (CSR). FIMI argued that contributions to DMF were ultimately spent on the development of mining lease hinterland.
Considering deviations from mining plans were inevitable during the national lockdown, the Indian Bureau of Mines (IBM), the mining regulatory and advisory body, should relax approved mining plans of each lease held during the current fiscal year 2020-2021.
On prevailing domestic taxes imposed on mining production, FIMI has sought that Integrated Goods and Service Tax (IGST) on imported machinery ranging 18% to 28% should be reduced to at least 5% while 18% GST charged on royalty payable to the government should be lowered to 5%, at par with the rate payable for sale of mineral produced.