State to respond Centre on special tax issue soon

Bhubaneswar: With the Centre rejecting its demand for imposing a special tax on "super normal profit" earned by mine owners, the state government on Friday said the matter was being examined and a response would be given next week. A letter has been received from the Centre in response to Odisha`s demand for imposition of mineral resource rent tax on super normal profit made by miners, Chief Minister Naveen Patnaik told reporters here.

The letter sent by Union Minister of State for Mines Dinsha Patel is being examined by the steel and mines department, he said.

"An appropriate reply will be given to the Centre early next week," the Chief Minister said.

Patnaik had sought imposition of a special mineral resource rent tax on miners in two letters to the Centre in November last year and in January this year, sources said.

Describing Odisha government`s demand as unjustified, Patel in his letter said all mines owners do not earn super normal profit like the state-owned National Mineral Development Corporation (NMDC).

He said it may not be prudent to generalise that the entire iron ore mining sector is earning profit to the scale equivalent to NMDC, which is a fairly large miner enjoying high-grade deposits.

Since FOB value also includes cost of transportation and handling charges on which royalty cannot be levied, it may not be appropriate to only see the FOB value of iron ore to conclude that super profits are being generated, he said.

Iron ore fine exporters in the state sell the raw material at around Rs 3,000 per tonne at mines area, but charge a hefty Rs 6,500 per tonne for exports due to higher freight charges spent on transportation through both rail and road routes, the letter said.

However, before the export boom, they were selling the fines at around Rs 500 per tonne, which is why the state government had sought super normal profit tax in line with Australia, so that the tax income would be spent for the development of areas surrounding the mines.

But the Australian tax is not meant for provincial exchequer the union minister said in his letter.

Patel further said that the upcoming Mines and Minerals Development and Regulation Bill has proposals for miners` contribution, equivalent to royalty paid on minerals, that would go to District Mineral Foundation in mining areas.