Goa miners grapple with high taxation, lower ore prices

The mining industry, which is all set to resume operations in Goa, finds itself in a tight spot as it faces the twin problem of a huge tax load and softer iron ore prices in the global market.

Panaji: The mining industry, which is all set to resume operations in Goa, finds itself in a tight spot as it faces the twin problem of a huge tax load and softer iron ore prices in the global market.

The miners in the state have announced that the preparatory work for resuming mining activity will start from October.

The industry had been closed since September 2012 after authorities spotted large-scale irregularities.

"With lower prices and high taxation, it becomes challenging to move out ore and this needs rationalisation of taxes," Goa Mineral Ore Exporters Association (GMOEA) Secretary Glenn Kalavampara told a news agency.

"The price of 58 degree ore has fallen to USD 37-38 while taxation on it is over 70 percent," he said.

Higher taxes have adversely impacted the business, especially when the international market is showing no signs of revival, he said.

"Wherever there is double taxation, the government can reduce it till prices are stabilised," Kalavampara suggested.

The office-bearer feels that the imposition of heavy export duty on iron ore is "an attempt to prohibit export of high grade ore".

"Goa traditionally has been exporting low-grade ore. The export duty on low grade ore should be removed," he said.

While the mining industry has got its leases renewed and paid the licence fees mostly, traditional mine owners feel that "it is not viable to resume business".

"Mining in these circumstances is not viable. The prices (of ore) are expected to fall further. Sale of auctioned ore (which was e-auctioned by the state government) is also not possible," said Ambar Timblo, MD of Fomento Resources, a leading mining firm in the state.

Timblo maintained that his firm is planning to restart operations. "But the decision on the actual date will be taken in the next month. So, the exact date of commencement of extraction is unclear at present," he said.

Vedanta's Sesa Iron Ore, which was the first company to announce its intention last month to mine again, has said the business leaves no profit after paying the taxes.

"The company looks at profit after taxes (PAT). Here there will be profit, but no PAT," Sesa Iron Ore's Vice-President, Corporate Affairs Aniruddha Joshi said. "When market prices went up pre-2008, the taxation increased. But after 2008 Olympics, when demand from China came down drastically, the taxation was reduced to zero, which was raised later. We expect similar action from the government now that prices have come down," Joshi explained.

"The government will have to see that the business is at par with foreign players. All the difference in business is due to taxation."

A steep fall of low grade iron ore price in international and domestic markets is only making things difficult for the miners.

"The base price of auctioning of the ore was not in tune with the reality of international and domestic prices and appeared to be driven by the idea of maximising revenue for the state exchequer," a mine owner said, requesting anonymity.

There's also a feeling that resumption of mining could be delayed due to huge unsold stock and blocking of available space for the purpose within the boundary of mining leases.

"Though the Supreme Court has entrusted the task of auctioning process with state agencies, their failure to initiate timely action in the last three years is surprising," a mine owner said.

Government records showed that of the approximately 15 millions tones of ore that was to be auctioned, only around 5.64 mt saw the light of day.

"Out of the total 5.64 mt auctioned ore, only 21 percent has been either transported to local steel mills or exported to China," a senior official from the Goa Mines and Geology Department said.

"In some cases, the auction quantity has remained unmoved for over 15 months." 

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