India: FIMI requests Karnataka CM to reconsider Karnataka Tax Bill, 2024

• FIMI warns bill would render Karnataka uncompetitive
  
  
• Southern branch urges CM to withdraw/reconsider bill
  
  

The Federation of Indian Mineral Industries, which represents the interests of the country's mining companies, has stated that Karnataka's new proposed mineral tax bill is discriminatory and will, if brought into force, effectively "sound the death knell of the mining industry" in the state.

In a letter addressed to the Chief Minister, dated 21 December 2024, the southern branch of the federation has asked for this proposed bill to be withdrawn or reconsidered. As BigMint reported last week, Karnataka, where JSW, NMDC, Vedanta, and MSPL among others operate, is considering charging a levy of INR 100 per tonne (t) of iron ore from mineral-bearing areas.

Additionally, INR 100/t is set to be levied as a tax on mineral-bearing rights on auctioned mines, while a tax three times of royalty will be imposed on mining rights acquired before or outside of an auction. Furthermore, all these taxes will be applicable retrospectively.

This move follows the Supreme Court's recent judgments upholding the state's right to impose taxes on mineral-bearing areas and mining rights.

The proposed Karnataka (Mineral Rights and Mineral Bearing Land) Tax Bill, 2024, would render Karnataka uncompetitive, warns FIMI. A similar letter has also been addressed to the state's Chief Secretary, explaining that the industry is already "struggling due to the ongoing economic slowdown and the lack of demand in the domestic and international markets," and rather than incentivising mining, the bill imposes further burdens.

In Karnataka, in addition to royalty (15%), levy towards the District Mineral Fund (4.5% of the average sale price of the mineral), levy towards the National Mineral Exploration Trust (0.5% of the average sale price of the mineral), miners also pay 10% of iron ore sale proceeds towards the special purpose vehicle (SPV) set-up and INR 33.5/tonne (t) for road + INR 33.3/t for rakes as a forest pass fee.

The letter also questions the logic of imposing such an excessive levy on non-auctioned mines, which is three times the royalty, along with a tax on mineral-bearing land at INR 100/t, when the MRT Bill proposes INR 101/t as a levy on auctioned mines. "This discrimination is highly illogical, ill-founded and unreasonable. It prima facie appears to operate in an unjust and prejudicial manner over the mining leaseholders who have obtained their mining leases other than through auction route," says the letter.

"It is also relevant to bring to your attention that, in this context, presently, to a large extent, mining lessees are producing leaner ores with marginal revenues and higher cost of production, including integrated beneficiation at the mine," wrote HM Khyum Ali, Director, FIMI South.