KOLKATA (miningweekly.com) – The Indian mining industry has called for a complete overhaul and rationalisation of the tax regime, including scrapping the export tax on iron-ore and bauxite.

The Indian mining industry has to bear the burden of one of the highest incidence of tax in the world. Mines allocated through preferential allotment have an effective rate of 64% and those awarded through the auction route 60%, the Federation of Indian Mineral Industries says in a statement.

“The rationalisation of the tax regime is necessary for sustainable development of the domestic mining industry, ensure long-term availability of raw material for domestic mineral processing industries and reduce dependency on imports,” the statement says.

Citing the example of high tax incidence as a disincentive for growth of the mining sector, the industry points out that, while exports of iron-ore fines with an iron content higher than 58% attracted an export tax of 30%, it does little to promote mining as domestic steel producers use small volumes of lower grade iron-ore.

FIMI wants to ensure that iron-ore miners are able to optimise production at their mines and says that scrapping the export duty for all grades of ore below an iron content 62% will enable miners to expand production, ship higher volumes overseas without impacting supplies to domestic steel mills.

The industry also points out that a 15% export tax on bauxite is contributing to the closing down of several bauxite mines in Gujarat and Maharashtra, as their volume of production is low and the export tax makes production unviable at time when there is no takers for small volumes by alumina refineries without captive mines.

While the link between the export tax and production has not been definitely established, the fact is that India, with the fifth largest bauxite reserves in the world at 3.5-billion tons, has recorded  a fall in production for the second consecutive year during 2017/18.

According to data sourced from the federal Ministry of Mines, Indian bauxite production during last financial year was recorded at 20.63-million tons, down 16% over corresponding previous financial year.

In fact, the rate of decrease in production has gained over the last two years, as the fall in output during 2016/17 was down by 12% over corresponding previous financial year and explaining the trend among large domestic aluminium producers to increasingly scout for bauxite assets overseas.

Significantly even with abundant reserves, no new bauxite mine has been operationlised in the country in the last ten years.