The Federation of Indian Mineral Industries (FIMI), the largest trade associations of mining companies, blamed government's prohibitive tax policy on the sector for rendering Indian mineral exports uncompetitive and for driving prices up in the domestic economy.
"The effective tax rate on the mining sector today stands at 69 per cent. This is resulting in exports being made unviable and Indian consumers are paying a much higher price as metals are primary inputs for most things," said Sanjay Pattanaik, president of FIMI.
He said that the tax rates in India are not commensurate with anywhere else in the world, where tax rates on the mining industry varies from 30-45 per cent.
"Service tax on royalty have gone up from 15 to 18 per cent and with mining inputs being taxed at 18 per cent rate or much higher for fuel, power by state governments, the tax structure have become totally prohibitive for our business," said Pattanaik.
The federation would be holding its AGM in the capital over the next two days, where senior mining ministry and commerce ministry officials are expected to attend.
The members on Monday said that they have been persisting with the government to ease some of the tax regulations from the sector, which had reduced its output heavily in the past few years.
"The export duty of 30 per cent on iron ore had made iron ore exports totally uncompetitive and we are sitting on a stockpile of 149 million tonne in Jharkhand and Odisha," said R.K.Sharma, FIMI secretary general.
"This low-grade iron ore could not be used within the country and despite demand, we are unable to sell it," Sharma said, adding that the mining industry had been in dialogue with the government to withdraw the 30 per cent export duty on iron ore.
Talking on the impact of high taxation rates on the mining industry, which contributed 2.4 per cent to India's GDP last year, S. Vijay Iyer, MD, Rio Tinto India said: "Our industry has become even less competitive globally after GST. It is creating more constraints than easing any pains of the industry."
"In effect, every thing requiring metals as an input is becoming costlier in the domestic economy due to such high tax rates on the industry. It makes more sense to import than to produce locally though India has adequate mineral reserves to meet its needs," said Iyer, whose company closed down diamond mining operations in Madhya Pradesh about two-years back.
India's iron ore exports have dropped from 117 million tonne in 2009-10 to about 30 million tonne (mostly done by government PSU MMTC) in the last fiscal. The drastic drop caused by a Supreme Court stricture restricting mining of iron ore in Karnataka and Goa, has seen a slight recovery last year.
