Steep taxes make mining unviable
Global investors stay away
A high tax burden in India compared to other resourcerich countries is making mining unviable and making it unattractive for investors.
A huge gap is found between the effective tax rate (ETR) on mining in India vis-avis other mineral-rich nations like Australia, Canada, South Africa, the US, and Mongolia. The data given by the Federation of Indian Mineral Industries (Fimi) show that the ETR on an iron ore mine in the country after including levies comes to 64 per cent in the case of new mines allocated after the amendment of the Mines and Minerals (Development & Regulation) (MMDR) Act, 2015, while for the older mines, it is higher at 69 per cent.
The ETR excludes the service tax at 15 per cent of the royalty, 10 per cent tax levied by the Supreme Court in Goa and Karnataka, and the forest development tax (FDT) levied by the Karnataka government. That apart, Odisha, the largest iron ore producer, levies the highest royalty rate on even the lowest grades of iron ore fines.
A comparison with other countries shows the high rates of taxes in India on the mining sector. In Canada, the ETR varies from 34 per cent to 39.5 per cent. It is 45.5 per cent in Indonesia (West Papua, 38 per cent in Sulawesi), 44.2 per cent in Namibia, 39.7 per cent in South Africa and Australia, and 37.6 per cent in Chile. At 31.3 per cent, Mongolia has the lowest ETR on mining.
RK Sharma, Fimi secretary general, said: “High taxes on mining in India, along with inordinate delays in grants and development of mines, have led to several major international players exiting the country. While resourcerich nations are competing to attract investors to explore mines, contribute to socioeconomic growth and create employment opportunities, in India, we are making it difficult for investors with stateof-the-art technologies to invest in exploration and development of mineral resources.”
According to a World Bank report, countries that compete for mineral sector investment ETRs between 40 per cent and 50 per cent. In the recent survey of mining companies by the Canada-based Fraser Institute, India ranks among the 10 least attractive jurisdictions globally (97th among 104) in terms of the investment attractiveness index for mining and exploration.
“The Indian mining industry cannot produce minerals in isolation today because their viability is closely dependent on trends in global commodity prices. It is imperative that policy decisions and government interventions should consider the international dynamics and attractiveness of other mining jurisdictions,” said Sharma.