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Allow steel industry to own captive iron ore resources

Industry body ASSOCHAM has called for allowing steel companies to own captive iron ore resources for sustainable growth and country's infrastructural development.

The Associated Chambers of Commerce and Industry of India said that all the integrated steel plants capable of undertaking viable, scientific and efficient iron ore mining should be made available captive iron ore mines.

Mr DS Rawat secretary general of ASSOCHAM said that "During the pre liberalization era, most steel plants were provided with captive iron ore mines which are the only domestic resource input for competitiveness of steel business.”

China grew its steel industry from a level of about 45 million tonnes per annum to nearly 700 million tonne per annum during this period, thereby outstripping every other country in the world. Currently about 65 million tonne per annum of steel is produced in India while there is a requirement of nearly 500 million tonne per annum for developing infrastructure.

Coking coal quality in India is fairly poor and its quantity is insignificant compared to the rising needs of domestic steel sector. The competitiveness of Chinese steel companies comes from the availability of coal, coking and steam at cost plus reasonable gross margin basis and effectively takes care of their national interest.

Thus, India too must restrain exports of iron ore for domestic consumption, said ASSOCHAM.

ASSOCHAM had previously raised concerns regarding government’s proposal to impose 26% tax on profits from coal mining and 100 per cent royalty on other minerals making Indian mining and mineral based industry most heavily taxed and uncompetitive.

Mr Rawat said “To make dividend payout of 10% to the government and shareholders, and further paying out 26% of profit or 100% royalty will impact employable funds and consequently the growth of mining companies.”

The royalty proposal might lead to an annual revenue loss of INR 6,000 crore to the exchequer on account of various taxes and valuation loss of public sector and private sector companies to the tune of INR 75,000 crore and INR 25,000 crore respectively.

The effective taxation on coal in India will be over 60% and about 55% in iron ore.

As the prices of power, steel and other commodities will increase, it will further fuel inflation and consequently the burden will be passed on to consumers.

Alternatively, an amount less than 10% of royalty by a mining lease holder and a matching contribution by the state government may be considered. When these funds are utilized, the percentage of royalty required to be paid may be increased, said ASSOCHAM.