ASSOCHAM calls for allowing Steel COmpanies to own captive iron ore resources

Industry body ASSOCHAM has called for allowing steel companies to own captive iron ore resources for sustainable growth which is crucial for the country's infrastructural development.

"All the integrated steel plants capable of undertaking viable, scientific and efficient iron ore mining should be made available captive iron ore mines," according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

"During the pre-liberlisation era, most steel plants were provided with captive iron ore mines which is the only domestic resource input for competitiveness of steel business," said Mr D.S. Rawat, secretary general of ASSOCHAM in a communication to the Ministry of Steel.

China grew its steel industry from a level of about 45 million tonnes per annum (mtpa) to nearly 700 mtpa during this period, thereby outstripping every other country in the world.

Currently about 65 mtpa of steel is produced in India while there is a requirement of nearly 500 mtpa for developing infrastructure.

Coking coal quality in India is fairly poor and its quantity is insignificant compared to the rising needs of domestic steel sector. The competitiveness of Chinese steel companies comes from the availability of coal, coking and steam at cost plus reasonable gross margin basis and effectively takes care of their national interest.

Thus, India too must restrain exports of iron ore for domestic consumption, said ASSOCHAM.

ASSOCHAM had previously raised concerns regarding government's proposal to impose 26 per cent tax on profits from coal mining and 100 per cent royalty on other minerals making Indian mining and mineral based industry most heavily taxed and uncompetitive.

"To make dividend payout of 10 per cent to the government and shareholders, and further paying out 26 per cent of profit or 100 per cent royalty will impact employable funds and consequently the growth of mining companies," said Mr Rawat.

The royalty proposal might lead to an annual revenue loss of Rs 6,000 crore to the the exchequer on account of various taxes and valuation loss of public sector and private sector companies to the tune of Rs 75,000 crore and Rs 25,000 crore respectively.

The effective taxation on coal in India will be over 60 per cent and about 55 per cent in iron ore.

As the prices of power, steel and other commodities will increase, it will further fuel inflation and consequently the burden will be passed on to consumers.

Alternatively, an amount less than 10 per cent of royalty by a mining lease holder and a matching contribution by the state government may be considered. When these funds are utilised, the percentage of royalty required to be paid may be increased, said ASSOCHAM.

Source : Equity Bulls

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