India’s Battle For Fair Mining Rates
The mining industry of India is opposing a proposed hike in iron ore royalty to from ten-percent to fifteen-percent because they claim that the increase would damage the revenue of small mining units. In a complete turnaround, they are instead demanding that the royalty rate for iron ore be decreased to 7.5% to battle unviable production.
In what has been called a “note of dissent”, The Federation of Indian Mineral Industries, or FIMI, has stated that the hike in iron ore royalties would do nothing to benefit the state’s revenue as net production would inevitably decrease
FIMI can be quoted as saying:
“Any increase in royalty will result in phenomenal rise in prices. This will result in marginal-grade mines going out of production. It will chock investments in new technologies and hinder development of low-grade mineral resources. Lessees would be prompted to mine higher grades, leaving low-grade minerals un-mined. This would lower the production and, eventually, the net revenue of the state is likely to be affected.”
The Mines Ministry’s Only Recommendation
A study group created in 2011 by the Mines Ministry suggested the royalty hike in a rough report that was to be finalized at a later date – a recommendation that it has been holding to since the creation of the group to help stimulate the growth of state revenue.
The Federation of Indian Mining Industries had this to say:
“There is no linear relationship of hiking royalties and getting higher revenues. The draft report of the study group has considered enhancing royalty rates as the only measures of increasing revenue. Any increase in royalty rates will further deteriorate the situation. Rather, it should be reduced to 7.5 percent to induce growth.”
Past & Future Decline In India’s Mining Industry
The mining industry in India has already seen massive job cuts and the resulting closing of many small mining companies. FIMI fears that raising the royalty rate of iron ore will only make things worse for the industry.
Furthermore, the iron industry has lost more than $17.5 billion in foreign exchange between 2010 and 2013 due to tightening export policies. FIMI also claims that the increase in iron ore royalties will only make the trading gap with China that much wider.