Govt reimposes curbs on beach sand mineral exports
Exactly 20 years after it opened the door for the private sector in beach sand mining, the government has now taken away their right to export minerals on their own through a gazette notification and introduced a canalisation system.
Exactly 20 years after it opened the door for the private sector in beach sand mining, the government has now taken away their right to export minerals on their own through a gazette notification and introduced a canalisation system. Players in the sector called the policy “myopic” and said their exports — Rs 4,000 crore per annum — will be hit hard.
The primary aim of canalisation of exports through Indian Rare Earths (IRE), is to curtail direct private sector export of beach sand minerals and their derivatives such as ilmenite, rutile and zircon, thereby keeping a close tab on shipments.
Beach sand minerals and their derivatives find diverse applications in paints and other decorative materials, papers and plastics as well as strategic and hightech applications. Currently, a major share of domestic production as well as exports are done by private sector firms.
“Export of beach sand minerals have been brought under the STE and shall be canalised through IRE. Beach sand minerals, permitted anywhere in the export policy, will now be regulated in terms of the new policy,” the notification said.
Private sector firms such as VV Minerals and Trimex, which do the bulk of exports, said the move would have far-reaching negative impact on the country’s beach sand minerals industry. Apart from coordination-related problems with IRE, the apprehension of untimely and irregular payment is also haunting them.
“The new policy to canalise all exports by private companies through IRE is a further blow to private companies. Private firms have made huge capital investments by way of technology, production facilities and established significant share in global markets. IREL is a competitor, and forcing private firms to canalise exports through IREL is an unfair business practice,” said V Subramanian, director of VV Mineral.
The ‘myopic’ policy will choke the sector which has the potential to transform India to a major global producer of high value products, he said. Since all minerals will be canalised through IRE, the PSU will remain the only touch point for overseas customers and this will erode the existing customer base that private sector firms have created over the years.
“The new policy comes as a huge setback to a niche beach sand mining industry. It increases our unease of doing business by rendering us globally uncompetitive, limits our abilities to bargain with global customers, binds us in potentially avoidable procedural delays and puts curbs on our expansion plans by throttling commercial activities,” said Pradeep Koneru, CEO & ED, Trimex Industries.
Beach sand minerals mining activity in India commenced in 1908. Until 1998, except for garnet, other minerals were restricted only to public sector companies. Production and value addition improved following the government ushered in liberalisation in 1998 allowing participation of the private sector.
Following the entry of the private sector, production of ilmenite and rutile increased to 5.2 lakh tonne and 72,000 tonne, respectively, in 2015-16. In sync with the rise in production, the export value has increased from approx Rs 35 crore in 1998 to over Rs 4,000 crore in 2016-17.
Source : https://www.financialexpress.com/industry/govt-reimposes-curbs-on-beach-sand-mineral-exports/1295666/
Ministry officials acknowledged that the goal of having a single rate of tax for the mining industry would be protracted, considering that several of the levies, including royalties, accrued to the kitty of state governments and that all mineral-rich states would have to be brought on board if a single rate of tax on minerals was to be evolved under the Goods and Service Tax (GST), the unified indirect tax regime introduced across the country last year.
However, the official said that the plan to move towards a single tax rate could start with iron-ore mining, wherein iron-ore was taxed at 5% and finished steel at 18%. The option could be explored in related mining taxes, like royalties subsumed in the GST rate, and enable the entire chain from raw material to finished steel to claim input credit at every stage of value addition.
The Steel Ministry will prepare the draft proposal to be submitted to the department of revenue under the Finance Ministry, but the final decision would rest with the GST Council, the apex body of federal and state government representatives governing the GST regime.
The challenge before such a reform for the mining sector would be that, while the total tax incidence on the miningindustry might not be lowered, the adjusting multiple taxes into a single rate and shift of accruals from the state government to the federal government could lead to a loss or revenue for state governments. The federal government would have to make provisions to compensate state governments for such a loss, officials said.
The net effective rate on mining, which amounted to about 64% in the case of mines allocated prior to 2015 through preferential allotment and 60% for mines allocated through the auction route thereafter, comprised royalties, contributions to District Mineral Fund (DMF) and National Mineral Exploration Trust besides the GST rate as applicable, making Indian mining industry one of the highest taxed in the world.
Officials said that while the aim of a single rate of tax on mining would not be to bring down the net effective rate of tax, a single rate would ensure lower compliance costs for miners and offer the option of claiming input tax credit from their buyers across the production chain.