Mining Bill makes profit sharing mandatory

The Bill,which mandates coal companies to share 26 per cent of their net profits towards people residing in their project areas and non-coal miners to shell out money equivalent to royalty,has,however,triggered sharp reactions from industry chambers and miners.

The Mines Ministry,which pushed for the legislation,expects it to effectively check maladies in the sector,regulate its growth and attract the much-needed investments. But,industry bodies like the Ficci,CII and Federation of Indian Mineral Industries (FIMI) — the apex body of miners — expressed apprehensions that the profit-sharing mechanisms might adversely affect investments in the sector. Ficci secretary general Rajiv Kumar said that the proposed contribution of 26 per cent of profit in case of coal and 100 per cent for other minerals will make mining unattractive for organised investors including foreign players. He argued that India’s mining sector is already one of the highly taxed ones in the world and the new Act will further increase tax incidence on coal to 61 per cent and iron ore to 55 per cent.

Secretary general of FIMI,RK Sharma,too,said that the profit-sharing mechanism would imply a revenue outgo of nearly Rs 5,000 crore for merchant miners. He warned that foreign investors are likely to shy away from investing in India as they are likely to find resource-rich Africa more lucrative for investment. CII National Committee on Mining chairman Rana Som said that there was a need to examine concerns raised by the mining industry over royalty,profit sharing and the mechanism on providing assistance to project affected persons before the Bill is finally rolled out.

Reacting cautiously to the cabinet decision,Coal India Limited chairman N C Jha said,“It is a government decision,we will have to implement it.” CIL sources said that the company would have to pass on the burden to its buyers,implying that power prices could shoot up further high with the fuel becoming costly. Stocks of metal and mining firms were hammered on the bourses today. While CIL lost by per cent,SAIL and Tata Steel were down by about 4 per cent.

Mines secretary S Vijay Kumar said that the Cabinet’s approval to the proposed National Mineral Regulatory Authority (NMRA) is a major step in combating illegal mining. “It will have powers to investigate and prosecute offenders. The authority will be empowered to look into cases of illegal mining,” Kumar said. As many as 82,000 cases were reported in 2010 and about 25,000 cases in first three months of this year,according to official data.

Other major provisions of the Bill include imposition of a Central cess and state cess,setting up of Mineral Funds at national and state level for capacity creation and consulting local community before notifying an area for grant of mining leases.