Indian cabinet passes new mine law; coal producers hit with 26% tax

A draft law approved by the Indian cabinet today directs miners to share their profits with people displaced by mining.

The Wall Street Journal (sub required) reports that the law, which has been pending for over two years, would have mining companies pay a royalty to create a fund to help those displaced by mining and related industries. Coal producers would pay a 26% tax on profits. A regulator has also been set up to monitor illegal mining and prosecute violators, in a direct response to recent scandals in the states of Karnataka and Goa respecting the illegal export of iron ore. 

Miners in India have often faced violent protests when the projects threaten to displace local populations, with protesters sometimes blocking land acquisitions. The new law is aimed at simplifying rules and smoothening land acquisitions, and to attract more mining investment. WSJ reports:

The bill proposes to give automatic mining approvals once a discovery is made after prospecting, mining ministry officials said. Currently, miners need separate approvals for surveying deposits, prospecting and mining.

However, critics say the requirement to pay more royalties is likely to have the opposite effect. The Hindu Business Line quotes R.K. Sharma, Secretary-General, Federation of Indian Mineral Industries:

“The tax burden will make the mining industry unviable. It won’t help attract any technology or investments,” Mr. Sharma said.

The bill is expected to be tabled in parliament during the winter session.

The chairman of Coal India, India’s largest coal producer, said in an interview with Bazaar Morning that the company would look at raising the price it charges for coal in order to mitigate the effect of the tax. Watch the interview below: