PERTH (miningweekly.com) – The Association of Mining and Exploration Companies (Amec) has warned that the removal of the diesel fuel credit could harm Australia’s mining industry.

Amec was responding to a call from the Greens party ahead of the national Budget on May 13, that the Australian government should remove the diesel fuel credit.

"First, this government wants to repeal the mining tax, which should be strengthened instead. Second, repealing the price on pollution lets big miners off the hook, creating a gaping hole in government revenue," said Greens leader Christine Milne.

"The Greens have always said farmers who need our support should continue to receive it through the fuel rebate, but the big miners can't have it both ways. They're making a one-off profit from natural resources that belong to every Australian, and if they won't pay the mining tax they must stop reaping billions of dollars from the public purse through rebates,” Milne added.

However, Amec CEO Simon Bennison said that the potential damage to the resources sector and the Australian economy by removing the diesel fuel credit was grossly underestimated.

“The call for the full removal of the diesel fuel credit is naive and does not take into account the essential role of diesel fuel in the mining industry. Many companies are off the grid and do not have access to a power supply other than diesel fuel generation.

“Diesel fuel is an input cost and contributes up to 7% of project cash costs and any erosion of this will have serious consequences for marginal operations. It will affect suppliers and shareholders and the capacity of companies to pay dividends. This will become a deterrent to future investment in Australian resource projects,” Bennison said.

He pointed out that small and emerging miners were subject to lower commodity prices, increasing production costs and the vagaries of the exchange rate, and as such were not making the 'huge profits' suggested by the Greens.

“The Greens don’t even seem to be aware that exploration companies make no income from mining activities and therefore do not make a profit at all.

“A major oversight by the Greens is that these resources companies are providing the future economic growth in the Australian economy, especially in rural and regional communities where companies provide thousands of jobs and much needed social infrastructure.”

Bennison further noted that the Greens’ call for the mining industry to do more "heavy lifting" ignores the billions of dollars paid by the industry to the federal government in income tax, and the significant economic and social benefits that it creates in most parts of Australia.

“The industry also pays billions of dollars each year to the respective state and territory governments as a return to the Australian community for the extraction of a nonrenewable resource, not to mention a myriad of other state- and territory-based taxes, fees, charges and levies.”