According to Sesa Sterlite, it has lost Rs100 crore in revenues due to delay in commencing its mining operation, and the forest department should be held responsible for this lapse

Recently, on 1st November, more than 5,000 strong mining engineers met at the National Mining Day convention to discuss the problems faced by the mining industry in India and how best it can contribute to the national development.

Their conclusion was that the industry is suffering due to lack of a sound policy, poorly administered land acquisition procedures, issues relating to mining leases, environmental clearances, varying interpretations of tax and duty applications and the protection of mineral-bearing lands from non-mining activities.

Each of the mine owners had to surmount one or more of these problems in a continuous manner, thus diverting the attention, energy and resources from mine developments, which would facilitate exports, feed domestic industry and create employment!

In the case of iron ore, according to Ministry of Mines, Indian reserves are estimated at 23 billion tonnes, accounting for 6% of the world’s known reserves. And, we have hardly cleared the surface!

Due to large scale illegal mining activity in Karnataka and Goa, it may be recalled that the Supreme Court had banned this two years ago. After investigation, the Supreme Court permitted recommencement of mining operations in Category A (45 mines) and Category B (49 mines), subject to their compliance of formalities and regulations that may be applicable in states of their location.

In 2009-10, iron ore exports, mostly to China, amounted to 117 million tonnes but after the ban and its revival, during 2012-13, exports reached only 18 million tonnes. In the last six months, covering April to September 2013, exports have amounted to 6.8 million tonnes.

The revival order enabled 15 mines to commence their operations, mining about five million tonnes, in addition to NMDC (National Mineral Development Corporation). By January 2014, the combined effort will enable them to reach only 12-14 million tonnes! While Indian mines are struggling to revive in the tough international market, Australia, Indian’s main competitor, has been able to ship 570 million tonnes so far with the prospect of supplying about 669 million tonnes in 2014!

To support the Indian mine owners and to encourage exports, a proposal was made both by Ministry of Commerce and by Ministry of Mines, that the export duty of 30% on iron ore, presently charged, be reduced, if not eliminated altogether. Ministry of Finance declined to do so on the grounds that the rupee depreciation of more than 15% had already benefitted the exporter!

China has now begun to import iron ore. After a lull for a few months and it is felt that in the international market, the Chinese government move to make “affordable housing” a priority, may actually increase their purchases from now onwards.

According to the Steel Index Ltd, iron ore with a 62% content delivered to the
Chinese port of Tinjin fetched a price of $135.80 per dry tonne early this month. Pricing situation, therefore, looks favourable for exports, provided
Indian mine owners are able to get the required “clearances” and book orders.

With all this data in the background, we come to our main story on Sesa
Sterlite, one of the Category A mine owners. It must be noted that five months after Supreme Court gave the clearance to commence the mining operations,
Ministry of Environment and Forests (MoEF) gave Sterlite “clearance” for one year!

Why it is for one year only and not for three years (or more), subject to yearly inspection and periodic verification of the work compliance, are separately
debateable issues.

Sesa Sterlite mining capacity is presently estimated at 2.3 million tonnes, and it is the largest in Karnataka State. However, the first stumbling block has come from the forest department. It had claimed development tax “on gross value of domestic and export sales”. Sesa Sterlite had paid Rs52.6 crore in cash, and to overcome the demands raised by the department, it gave a bank guarantee for Rs44.10 crore “under protest” because Sesa Sterlite had paid the development tax on invoice value at the time of vacating the forest area. Earlier, the forest department had stated that the company would be given permission to mine once the tax was paid. Yet, after receiving both, as mentioned above, they have not done so!

This only means that it is imperative that there should be a clear-cut ruling in regard to the development tax payable. It is common sense that the tax should be collected on the invoice value of the goods supplied. This should be simple procedure in collecting the development tax, with the bank being automatically authorised to credit the department with the tax on negotiation of export or domestic sale documents!

Either the development tax should be on a percentage basis of the invoiced value, or a flat rate fixed by the government. Besides, it is not clear as to whether there is a uniform tax leviable by the forest department, or if it varies from state to state. This kind of ambiguity should not prevent mining operations to commence or to do anything that would hamper our exports. In this particular case, according to Sesa Sterlite, it has lost Rs100 crore in revenue due to delay in commencing its mining operation and the Forest department should be held responsible for this lapse.

As if this is not enough, the forest department has sought clarification from Sesa Sterlite whether it has merged with Sesa Goa to form this company! Such flimsy questions are indicative of delaying tactics adopted by government departments, as Sesa Sterlite, according to their spokesman, had given all the relevant information.

The country is already reeling under the strain of current account deficit, and it is essential that every effort is made to revive our exports in the case of iron ore also. Besides, the Industry hopes that clearances for commencing operations in Goa may also be given by the Supreme Court, so that we can do our best to obtain business again from China and reduce our balance of payments with them.

Moneylife has covered these issues before and it is rather sad that we find we have too many headless chickens running all over the place because of lack of clear-cut laid down policy which leaves nothing to chance and interpretations to one’s own conveniences! Because of such attitude and non-cooperative behaviour of government offices, exporters like Sesa Sterlite are forced to look for outside sources, such as Liberia, to obtain iron ore. Such hurdles affect our exports as much as our own domestic industry which also employs thousands of wage earners.

Courtesy: moneylife