Lower taxes, quick permits the right niti on minerals

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New Delhi | Published: January 17, 2019 3:45:51 AM

Even non-oil minerals account for 30% of imports, yet our levies very high and permissions time-consuming.

niti aayog, taxes, minerals, Niti Aayog points out that India’s imports of minerals are roughly seven times as high as the domestic output; such is the poor level of exploration and production.

Given that even non-oil minerals account for 30% of the country’s total import bill—and around 55% if oil is included—Niti Aayog has done well to propose that the government adopt a new mineral exploration strategy in order to encourage local exploration and production. The Niti Aayog strategy paper on minerals points out, India’s “prospective geology is broadly similar to that of Western Australia, especially in relation to iron ore, bauxite, coal, diamonds and heavy mineral sand”, but of the area identified as rich in minerals, only 10% has been—the corresponding figure for Australia is 95%—and an even smaller 1.5% is presently being mined. According to Niti Aayog, even doubling the area explored to 20% of ‘obvious geological potential’ can create an additional 5 million jobs by 2022-23, from the current 10 million. Indeed, Niti Aayog points out that India’s imports of minerals are roughly seven times as high as the domestic output; such is the poor level of exploration and production.

It is to fix this that Niti Aayog suggests a better minerals exploration and licencing policy and fixing of the exceptionally high taxes/royalties/levies—while these add up to around 65%, the global maximum seems to be in the region of 40%. Equally important, ways have to be found to ensure that all necessary permissions are granted at the earliest. While Niti Aayog recommends that all statutory approvals should mandatorily be granted within a period of 180 days; it suggests that, if this is not given, a provision for a deemed-to-have-been-given approval be put in place in the law; it also suggests that local forest officers may be empowered to grant permission under the forests law for exploration in forest areas. To put this in perspective, environmental clearances take up to even 390 days to get, and it was found in the case of the government-owned Coal India—which has been fined `40,000 crore already for illegal mining—that it was routine practice for the government to give environment clearances late and then retrospectively condone the mining that was illegal since it took place without the environmental clearances. The fact that a PSU, which has no reason to damage the environment for profits—in the way the private sector is accused of doing—tells you just how serious the problem with India’s regulatory system is.

While the government can certainly help reduce the mandatory levies—iron ore royalties in India are 30% (15% for new miners) versus 6.5-7.5% in Australia and 2% in Brazil—it can also play a big role in ensuring local communities are less hostile when it comes to mining companies. Certainly, if more stringent 24×7 checks were kept on the quality of mining—using drones and satellite imagery make this easier—local communities would not feel their lands were being destroyed and valuable forest cover removed. Indeed, the Supreme Court has pulled up the government for not spending `90,000 crore of the Compensatory Afforestation Fund Management and Planning Authority (CAMPA) fund; had enough forestry been done on time, the local population would be less averse to fresh mining. Also, around three-fourths of money that states got via the District Mineral Foundation—DMF funds are meant to be used to benefit local people affected by mining activity—have not been spent, making it clear that it is not just the Central government that is not doing its job. With such a massive failure to monetise the country’s assets, is it any wonder that the current account deficit mostly looks like it is about to swing out of control?

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