Iron Ore miners need to pay 50% more of the royalty fees from what they are paying at present to the government as per the recommendations made by the Indian government panel.
Major iron ore miners like National Mineral Development Corporation Limited (NMDC) and Sesa Goa Ltd. along with the giant steel companies of India who own mines of their own like Tata Steel Ltd. and Steel Authority of India Ltd. (SAIL) will have to pay 15% of their sales to the government who for now are paying 10% of their sales to state governments. The Panel report will be submitted to the Mines Minister, Disha J. Patel in June, 2013 and will go for approval from the Cabinet after it is submitted.
Earnings of iron ore miners and steel-makers are in a threat because of increased taxation, since they are struggling with their falling prices of alloy and its raw material. With this increase in tax rates their competitors will be at a great benefit in the export market, especially the bigger rivals such as Brazil’s Vale SA and Australia’s Rio Tinto Group (RIO) and Broken Hill Proprietary Company Limited (BHP Billiton Ltd.)
Iron Ore Royalty in India
Chairman of SAIL, C. S. Verma said in May, 2013 that the average selling price of SAIL has fallen by 11% and reached to Rs 34,489 ($579) per MT in the three months ended March 31, 2013, when compared to the selling price rate of last year.
The increase in royalty fees of iron ore will make way for the new mining law of the country which is waiting for an approval from the parliament. According to the law, the miners need to donate an amount which is equal to the royalty fees, to the social welfare programs.