The government increased mineral royalty rates in 2014-15, saying this will benefit mineral-rich states that are economically backward. Recently, it approved the creation of a district mineral foundation (DMF) fund to which auctioned mines will remit up to one-third of royalty. Mine holders from the pre-auction era will pay up to 100% of royalty. The cumulative effect of these decisions affect India’s global cost competitiveness, especially as the commodity super-cycle has ended. India was already leading mining countries, ranked by payouts to government as a percentage of profit before tax, according to Tata Steel Ltd. The levies are likely to greatly widen the gap. The accompanying chart, sourced from Tata Steel, compares the government levies on mining in different countries. India tops the list.
The writer doesn’t own shares in the above-mentioned companies.
