Rediff.com« Back to articlePrint this article

SC verdict on royalty a jolt to mining industry

August 14, 2024 15:36 IST

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 Rs 1.5 lakh crore to Rs 2 lakh crore, industry players said on Wednesday.

Mining

Photograph: Rogan Ward/Reuters

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 25th July, 2024 has given unbridled powers to States for imposing various taxes and levies, said B K Bhatia, additional secretary general FIMI.

"Now this order of 14th August mandating collecting dues retrospectively with effect from 1st April, 2005 will give further jolt to the Indian mining industry as arrears may work out to the tune of more than Rs 1.5 to Rs 2 lakh crores 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 judgement, 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.

Echoing similar sentiments, the International Copper Association India managing director Mayur Karmarkar said that these changes coming from the Supreme Court disturbs the business models of the industry.

On Wednesday, a nine-judge Constitution bench headed by Chief Justice DY Chandrachud said the argument for prospective effect of the July 25 ruling is rejected.

The bench also comprising justices Hrishikesh Roy, Abhay S Oka, BV Nagarathna, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih, however, said there will be conditionalities on payment of past dues.

It said payment of dues by the Centre and mining companies can be made to mineral-rich states in a staggered manner over the next 12 years.

The bench, however, directed the states to not impose a penalty of any kind on payment of dues.

The Centre has opposed the demand of states for refund of royalty levied on mines and minerals since 1989, saying it will impact the citizens and the PSUs will have to empty their coffers by Rs 70,000 crore according to initial estimates.

CJI Chandrachud said this verdict will be signed by eight-judges of the bench who by majority decided the July 25 judgement giving the state's power to levy taxes on mineral rights.

He said that Justice Nagarathna will not sign Wednesday's verdict as she had given a dissenting view in the July 25 verdict.

© Copyright 2024 PTI. All rights reserved. Republication or redistribution of PTI content, including by framing or similar means, is expressly prohibited without the prior written consent.