The domestic mining industry wants the government to prune incidence of taxes on the sector to around 30% from the present 45-50% as this would help increase the industry’s contribution to the country’s gross domestic product (GDP) to 5% from around 2% at present.
“The government has taken numerous initiatives for reducing total quantum of taxes and levies on mining industry from 60-55% to 45-50%. However, the same is still very high as compared to other mineral-rich countries, where it is approximately 30%,” Ficci president Sanjiv Mehta said on Tuesday.
Speaking at a seminar jointly organised by Ficci and state-run iron ore miner NMDC, Mehta said every 1% incremental growth of the mining and quarrying sector will convert to 1.2-1.4% incremental growth rate of industrial production and, correspondingly, will result in an incremental growth of around 0.3% in the country’s GDP.
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According to mining industry association Federation of Indian Mineral Industries (FIMI), despite a reduction in the corporate tax rate, the domestic industry pays 45.9-49.9% tax, the highest in the world. The difference in the rate is because of higher payout towards district mineral foundation (DMF) — 30% of the royalty for those who got the mine before the auction regimes took effect in 2015 vis-à-vis 10% for those who got the lease through the auction route.
Mehta, who is also the CEO of Hindustan Unilever (HUL), said given the abundance of mineral wealth in the country and emerging opportunities from sectors such as infrastructure development, construction and end-use, mining sector has the potential to grow manifold.
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Initiatives like PM Gati Shakti, Bharatmala, SagarMala, DFC, railway expansion will fuel demand for metals like steel and aluminium. This, in turn, would drive demand for steel and cement and consequently of minerals like iron ore, bauxite, limestone & others, he said.
“Looking at steel alone, as per various stakeholder consultations held for Vision 2047, the industry is looking at tripling production capacity to approximately 500 million tonne (MT) by 2047, quadrupling steel production to around 425 MT and tripling the per capita steel consumption to 225 MT. Aligned to the targets envisaged, the iron ore requirement for 425 MT steel production would be around 680-720 MT and coking coal approximately 350 MT, giving huge impetus to the mining activities in the country,” he said.
Mehta said targets envisaged for the steel industry by 2047 would entail movement of materials of nearly 1,700 mtpa, including finished goods as well as raw materials. However, at present, India’s supply chain and logistics costs account for 13-14% of country’s GDP, compared to a global average of 7-8%.
An excessive dependence on transportation by road and under-utilisation of waterways and sea networks, coupled with poor infrastructure, have increased supply chain costs for the industry, he said.