JSW has asked for any fix to the royalty on royalty issue to be applied retrospectively, threatening to surrender existing mining leases if this was applied only prospectively.
The industry has long complained about how the average sale price (ASP) is calculated by the Indian Bureau of Mine, not discounting the royalty already paid. This ASP then becomes the basis of royalty computation essentially leading to royalty being also charged on royalty.
The Centre has formed a committee looking into the matter. In its submission to this committee, the state’s asked for changes if any be applied prospectively and not retrospectively altering the conditions under which mines were auctioned. It also pointed out that the cost of royalty was invariably passed on to the buyer anyway.
In a letter to the Director of Mines on Wednesday, JSW which bagged four iron ore mines in Odisha in February 2020, complained that basing premiums on the ASP was like “adding salt to the wound.” The letter must be seen in the context of rumors that JSW intends surrendering two of the four mines it bagged in 2020. (Jajang and Gonua failed to meet their minimum production targets.)
The letter points out JSW had sought a clarification in pre-hid meetings on how ASP, which decides various mining taxes and now premiums, would be calculated. The state government’s response had been, “As per provisions of the applicable law prevalent at that time.” It presumed this “anomaly” would be rectified in due course.
If changes were only applicable prospectively, it would impose an “unfair, inequitable, prejudicial and discriminatory burden leading to operation of mines being uncompetitive.” JSW argued the only competitive strength of the Indian steel industry was the availability of domestic iron ore at competitive prices that could compensate for the “slew of disadvantages such as high logistics, interest, power costs and non-modvatable taxes.”
Leave a Reply