The Federation of Indian Chambers of Commerce & Industry (FICCI) fears that India’s proposed new Mines and Minerals Development and Regulation Act will make the country the highest taxed worldwide in the mining sector. FICCI expresses concern that India’s mines will become uncompetitive globally with the tax hike.
"This means that the taxation rates in the mining industry in India would perhaps be the highest in the world. Such exorbitant levels of taxation would render the mining industry highly uncompetitive globally," FICCI said in its representation to the Prime Minister.
"Indian mining sector is already one of the highly taxed sectors globally, with an estimated effective tax rate of around 43 percent for iron ore, as compared to 35-40 percent for most of the major mining countries like Brazil, South Africa, Australia, Canada," FICCI Mining Committee's Chairman Tuhin Mukherjee said.
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"In India, the effective tax rate will rise to over 60 percent in case of coal and 55 percent in case of iron ore after these new provisions are implemented," Mukherjee added.
A ministerial panel on mining approved a draft bill in the first week of July that would obligate coal miners to share 26 percent of profits and non-coal miners 100 percent of royalties with project affected people. Joint Managing Director of Jindal Steel and Power Anand Goel claims the profit-sharing and royalties will equate to Rs 15,000 crore ($3.3 billion) annual payment to come from the mining firms.
According to Goel, "It will create super rich pockets in the mining areas leading to a huge disparity and dissatisfaction among the rest." There are even concerns that people from other regions will start migrating to the rich mining regions.
While India’s mining sector has only recently opened up to foreign investment in the last decade, there are fears that the higher taxes will drive away the already slow foreign investment the country has seen. However, the country is still fuming over the recent mining scandal in the Indian state of Karnataka that saw mining companies and government officials illegally selling $3.6 billion of iron ore. Higher taxes and profit-sharing with mine-affected communities may be some form of retribution for the shady mining activities that have come to light.