KOLKATA (miningweekly.com) - The Indian mining industry is unimpressed by the government’s recent cuts in corporate tax rate and lofty pronouncement calling for an increase in mineral output of 200% over the next seven years.

The Federation of Indian Mineral Industries (FIMI) said that despite the reduction in corporate tax rate, the Indian mining industry continued to remain burdened with the highest tax rate in the world, with an effective rate of 58% in the case of existing mines and 54% in the case of mines allocated through the auction route.

“The mining sector has a pivotal role to play in government's ‘Make in India’ policy. The government aims to increase mineral production by 200% in value terms over the next seven years. The National Mineral Policy 2019, that has been unveiled with the objective of attracting higher private investments in the sector will play an import roles in achieving this target,” Mines Minister Prahlad Joshi said.

Last week, the government, to re-invigorate sluggish industrial growth, announced a reduction in the corporate tax rate from 30% to 22%.

However, FIMI maintained that this was not sufficient to revive growth in the mining sector, which is facing slowdown in production and job losses.

“It is obvious that Indian mining industry is heavily taxed not only in comparison with international levels but also in comparison with other domestic sectors. Government needs to realize that the taxation regime for mining affects all downstream units and employment creation while already skewing the balance of payment through increasing imports of minerals,” FIMI secretary general R K Sharma said.

Taxes on mining included corporate tax, mandatory corporate social responsibility costs, dividend distribution tax, royalty, District Mineral Fund, National Mineral Exploration Trust, taking the effective tax rate to 58% for existing mines and 54% in the case of mines secured through competitive bidding. This compared to as low as 30% in other resource-rich countries and up to maximum of 45% in some countries, FIMI said.

The mining industry has also picked up an issue with the government claim that the auction process adopted for allocation of mineral assets to private investors since promulgation of the Mines and Minerals (Development and Regulation) Act 2015 has ensured "transparency and competition" in the industry.

FIMI has countered that most resource-rich countries followed the 'first come, first served' method of allocation of mineral assets, which was replaced in India by mandatory auction in 2015.

On the contrary, according to it, the auction process had slowed down the process of bringing new mineral blocks into production.

Data provided by FIMI showed that in 2010 to 2014, 49 reconnaissance permits (RPs) were granted but since auction became mandatory in 2015 not a single RP had been granted to private miners. During the same 2010 to 2014 period 496 prospective licences were granted but only one licence had been granted since 2015 out of the eight mineral blocks auctioned for a prospecting licence cum mining lease.

Similarly 494 mining leases were executed during 2010 to 2014 but since 2015 none of the mining leases have been executed out of the 42 greenfield mineral blocks that were auctioned, FIMI said.