State-owned major coal production company Coal India will have to pay around Rs 38,000 crore to mineral-rich states over the next few years after the Supreme Court granted states the power to tax mineral rights and mineral bearing lands retrospectively, official sources told FE.
However, the company is optimistic of recovering almost 80% of the amount through its Fuel Supply Agreements.
The impact is basically on two of CIL’s subsidiary companies namely Mahanadi Coalfields Limited and Central Coalfields Limited, the company’s chairman and managing director P M Prasad had earlier said.
“The quantum they (the subsidiaries) will have to pay to the state governments is around Rs 38,000 crore. They will take from the power sector and pay to state governments. While 80% they will recover from FSAs and the power sector, the remaining 20% CIL will bear,” the official said, adding that the company will not need to pass on the price to consumers. “We may have some 10-20% loss but will be able to recover the rest.”
The company’s revenue from operations during the third quarter of the fiscal FY25 stood at Rs 35,779.78 crore. In FY24, the company recorded its revenue from operations at Rs 1.42 lakh crore.
The Supreme Court, in August last year, granted the states the right to impose taxes on mines and minerals extracted apart from the royalty received retrospectively.
The majority verdict declared that royalty on minerals is not a tax but a contractual consideration and that States have legislative power to tax mineral rights and mineral-bearing lands over and above the collection of royalty under the Mines and Minerals (Development and Regulation) Act 1957.
The judgment overrules the previous judgment on the India Cements case which had held royalty to be a tax. The Court also clarified that Entry 54 of List I (Union List) is a regulatory entry and does not vest the power of taxation with the Union.
The decision is expected to have far-reaching implications for mineral resource management and revenue distribution in India, potentially altering the fiscal relationship between the Union and mineral-rich states, according to experts.
Coal India, apart from its traditional business, has also been diversifying into mining of critical minerals while exploring asset acquisitions overseas.
The company is also under discussions with critical mineral asset owners in Australia, Argentina and Chile for equity stake as a favoured option. “Around fifteen non-disclosure agreements have been signed so far with several companies across the critical mineral value chain. Initial due diligence has been completed for some of those assets.,” the company had told FE.