SC verdict: Rs 2-trn payout load on mining sector

CIL is going through the above order and based on the above, the company will assess the probable financial impact thereof, which will be disclosed in due course of time -- Coal India

It will impact the mining industry at large and we are evaluating to what extent it would be affecting us. To comment in detail we are assessing both short term and long term implications -- Amitava Mukherjee, CMD, NMDC

Financial Implications

♦ Collecting dues retrospectively from April 1, 2005

♦ Mines in Odisha and Jharkhand would be most affected

♦ Latest verdict overruled a 1989 judgment

♦ That held that only the Centre has power to impose royalty on minerals and mineral-bearing land

♦ Centre argues that it’ll erode PSUs’ coffers by Rs70,000 cr

♦ However, CJI said there will be conditionalities on payment of past dues

New Delhi: The Supreme Court verdict on mining royalty case will give a further jolt to the Indian mining industry and will have very large financial implications, as arrears may work out to the tune of more than Rs1.5 lakh crore to Rs2 lakh crore, industry players said on Wednesday.

The Supreme Court on Wednesday upheld the power of states to levy tax on mineral rights and mineral-bearing land, and allowed them to seek refund of royalty from April 1, 2005 onwards. According to a senior mines ministry official, the verdict will have a very large financial impact on mining, steel, power and coal companies.

“The investment of the companies operating in mining, power and steel sectors will also be hit,” the official said. According to Miners’ body FIMI, the Indian mining sector is already saddled with highest taxation in the world. The judgement of the Supreme Court of July 25, 2024, has given unbridled powers to States for imposing various taxes and levies, said BK Bhatia, Additional Secretary General FIMI.

“Now, this order of August 14 mandating collecting dues retrospectively with effect from April 1, 2005, will give further jolt to the Indian mining industry as arrears may work out to the tune of more than Rs1.5 to Rs2 lakh crore and the mines in the states like Odisha and Jharkhand would be most affected,” Bhatia added.

In a majority 8:1 verdict on July 25, the bench had held that legislative power to tax mineral rights vests with states. The verdict had overruled a 1989 judgment, which held that only the Centre has power to impose royalty on minerals and mineral-bearing land.

According to Bhatia, this (the latest SC verdict) is bound to have a crippling impact not only on the mining industry but on the entire value chain and will lead to unprecedented inflationary rise in all the end products. “Considering the severity of the issue and to have a stable tax regime for bolstering the growth of the mining sector, we feel that the union government should take necessary legislative mitigating measures on an urgent basis,” Bhatia added.