We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
Saturday, 22 October 11
WILL THE PROPOSED 26 PERCENT PROFIT SHARING CLAUSE IN THE MINING BILL SPEED UP THE PRODUCTION OR SCARE AWAY INVESTORS? - DIPESH DIPU
.jpg) A draft law has been approved by a ministerial panel headed by Finance Minister Pranab Mukherjee of India which, if passed by the Cabinet, will make it mandatory for the coal producers to share 26 percent of their profits with the population affected by the project. The proposed law has raised objections from the mining industry, fearing that it would result in heavy taxation, which, in turn, would diminish the investments in the sector. However, there are many who are in favour of it, including the largest coal producer, Coal India Ltd.
The mining industry is unique in some sense because of the magnitude of the environmental and social problems associated with this industry. A number of specific characteristics of the mining industry contribute to these problems. Choices of locations are not flexible, so often mining takes place in ecologically and socially sensitive areas. Particularly in those cases, the damage tends to be irreversible. Another characteristic of the mining companies is that they tend to be seen as an economically strategic sector. These two parameters tend to imply a conflict and a risk in terms of corporate accountability. That said, the mining industry has been moving from being a voluntary and marginal contributor to the society—it is part of becoming a partner in social development and making a significant impact on the standard of life for the project affected people. The Mines and Minerals (Development & Regulation) Bill that stipulates that coal mining companies will have to share 26 percent of their net profit for the purpose of the social balancing act. While there cannot be two opinions about compensating the project affected people, the stipulation of 26 percent share of profit does appear steep.
It may have an impact on investment in coal mining sector. And investments in mining ventures should not be viewed in isolation. Any impact on the investment in such a mining venture must consider the micro-economic impact of the venture. It would be stating the obvious that minerals produced from mining ventures are typically consumed in manufacturing sector and the chain of value additions end with the ultimate consumer. In case of a coal mine, the investment in mine is likely to be coupled with investment in power generation, steel or cement. If we take the example of coal mining and power generation, for every Rupee invested in coal mine, typically, five-fold investment goes into power generation plant. This can be enlarged, if the project needs infrastructure investments as well. Similar is the multiplier effect on generation of employment and these projects also help create local business opportunities and employment in these ancillaries. The local business development occurs through the investment in a coal mine and addition of power project in the portfolio, which enhances levels of economic activities and improvement in purchasing power of people in the region.
There is a difference between tax and social contribution, but the mandatory nature of the social contribution can make it appear similar to tax. Currently, coal mining in India attracts following taxes and contributions: Corporate income tax – 33 percent; Royalty – depends on the coal quality/grade; Dead rents – lease rents for land; Corporate social responsibility commitments (percent on revenues) – largely voluntary; Education cess – two percent surcharge; Environment levies – for coal, it is Rupees 50 per tonne of raw coal mined; and Indirect taxes – on consumables. If the 26 percent mandatory profit share is implemented, the taxes and mandatory contributions will account for more than half of the cost of coal production. While costs per se may not be a concern as much as the capacity to pass these costs on to the final consumer, which is where, the industry concerns may lay.
It is observed that raising the level of taxation brings the cash flows forward to the present from its mineral sector, which otherwise is due over time. Reason for this being the observation that tax hike always raises government revenues over the first few years from its promulgation. This is likely to discourage exploration and mine development in the longer run, and so reduces tax revenues on a life cycle basis.
The provision for profit share is likely to have limited success in addressing long-term issues that confront the industry and its investment environment, as hence, the same project affected people. Considering the macro-economic parameters, in long run, the industry and the government, as also the other stakeholders, including project affected people are likely to witness lower realization from a higher imposed contribution required from the mining projects. The provision, as it stands, is likely to erode the attractiveness of coal mining operations and may even act as a deterrent to investments into the marginally profitable coal blocks. It may help that the proposed profit taxes should be dropped in favour of enhanced but fair compensation to project affected people. Fair compensation for the project affected people should be based on earning capacity from that land keeping in view the market conditions for requirement of land. It may be suggested that in addition to compensation for land, the displaced should get annuity for life of the lease period at a rate agreed by the mining company, project affected people and the government.
The above analysis was originally published on Infraline.
The views and opinions / conclusion expressed on this analysis is purely the writers’ own.
About Dipesh Dipu
Dipesh Dipu works as Director with Deloitte in the Energy and Resources consulting practice of the firm and anchors the Firm’s initiative in the mining and metals sectors. He is a mining engineering graduate from Indian School of Mines and is a Chartered Financial Analyst (CFA).
He has also done executive program in business management from Indian Institute of Management Calcutta. Dipesh has recently been awarded the Abheraj Baldota Gold Medal for the Young Mining Engineer of the Year 2007 by the Mining Engineers’ Association of India in recognition of his contributions in the improvement of mining industry in India.
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Friday, 30 September 11
INDIAN IRON ORE MARKET GETTING ACTIVE - FEARNLEYS AS
Handy
The Atlantic market continued its strong trend with fresh cargoes entering the market. Vessels open US Gulf fixed tick above US$ 27k back to t ...
Friday, 30 September 11
KRISHNAPATNAM PORT WINS GLOBAL PORT & COAL PORT OF THE YEAR AWARDS
COALspot.com - Krishnapatnam Port, a dynamic new generation world class port located in the East Coast of India has been adjudged the winner in the ...
Thursday, 29 September 11
INDONESIA'S MINERS FACE AN UNCERTAIN FUTURE - RUPERT WALKER
An evolving regulatory framework for the country's minerals industry could threaten its profitability and stifle investment.
The five-year surge ...
Thursday, 29 September 11
DRY BULK MARKET FALLS MID-WEEK, FURTHER DROP EXPECTED NEXT WEEK ON CHINA HOLIDAYS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market, as reflected by the Baltic Dry Index (BDI) retreated by 0.36% yesterday reaching 1,920 points, with the Capesize segment suffer ...
Wednesday, 28 September 11
ATLAS RESOURCES TO SELL 25% STAKE IN IPO - INSIDER STORIES
Insider Stories reported that, coal producer PT Atlas Resources Tbk, that is controlled by Indonesian businessman Andre Abdi, plans to sell 783.33 m ...
|
|
|
Showing 5056 to 5060 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Energy Link Ltd, New Zealand
- International Coal Ventures Pvt Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Dalmia Cement Bharat India
- Billiton Holdings Pty Ltd - Australia
- Standard Chartered Bank - UAE
- Directorate Of Revenue Intelligence - India
- Eastern Energy - Thailand
- GMR Energy Limited - India
- Mintek Dendrill Indonesia
- Uttam Galva Steels Limited - India
- Globalindo Alam Lestari - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Planning Commission, India
- Manunggal Multi Energi - Indonesia
- Ministry of Finance - Indonesia
- Goldman Sachs - Singapore
- Anglo American - United Kingdom
- Gujarat Mineral Development Corp Ltd - India
- Wilmar Investment Holdings
- The Treasury - Australian Government
- Bulk Trading Sa - Switzerland
- Price Waterhouse Coopers - Russia
- Renaissance Capital - South Africa
- Electricity Generating Authority of Thailand
- Eastern Coal Council - USA
- Australian Commodity Traders Exchange
- San Jose City I Power Corp, Philippines
- MS Steel International - UAE
- Vijayanagar Sugar Pvt Ltd - India
- Larsen & Toubro Limited - India
- Wood Mackenzie - Singapore
- Kumho Petrochemical, South Korea
- Semirara Mining Corp, Philippines
- Independent Power Producers Association of India
- Tata Chemicals Ltd - India
- Mercator Lines Limited - India
- Kepco SPC Power Corporation, Philippines
- Australian Coal Association
- Madhucon Powers Ltd - India
- Oldendorff Carriers - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- SN Aboitiz Power Inc, Philippines
- European Bulk Services B.V. - Netherlands
- TNB Fuel Sdn Bhd - Malaysia
- Jaiprakash Power Ventures ltd
- Straits Asia Resources Limited - Singapore
- Interocean Group of Companies - India
- Bhatia International Limited - India
- Salva Resources Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Gujarat Electricity Regulatory Commission - India
- Vizag Seaport Private Limited - India
- The University of Queensland
- Thai Mozambique Logistica
- Miang Besar Coal Terminal - Indonesia
- Electricity Authority, New Zealand
- Bhushan Steel Limited - India
- Ambuja Cements Ltd - India
- Grasim Industreis Ltd - India
- Indonesian Coal Mining Association
- India Bulls Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Pendopo Energi Batubara - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Aboitiz Power Corporation - Philippines
- Simpson Spence & Young - Indonesia
- Bangladesh Power Developement Board
- Malabar Cements Ltd - India
- Sical Logistics Limited - India
- Savvy Resources Ltd - HongKong
- Ceylon Electricity Board - Sri Lanka
- Georgia Ports Authority, United States
- Leighton Contractors Pty Ltd - Australia
- Indogreen Group - Indonesia
- Thiess Contractors Indonesia
- Bharathi Cement Corporation - India
- Coastal Gujarat Power Limited - India
- Vedanta Resources Plc - India
- Barasentosa Lestari - Indonesia
- CNBM International Corporation - China
- Sakthi Sugars Limited - India
- Meralco Power Generation, Philippines
- Attock Cement Pakistan Limited
- Indian Energy Exchange, India
- Orica Australia Pty. Ltd.
- TeaM Sual Corporation - Philippines
- Chettinad Cement Corporation Ltd - India
- Therma Luzon, Inc, Philippines
- Trasteel International SA, Italy
- Jindal Steel & Power Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Energy Development Corp, Philippines
- Intertek Mineral Services - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Marubeni Corporation - India
- Africa Commodities Group - South Africa
- Siam City Cement PLC, Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Singapore Mercantile Exchange
- Tamil Nadu electricity Board
- SMG Consultants - Indonesia
- VISA Power Limited - India
- Baramulti Group, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Sojitz Corporation - Japan
- Bukit Asam (Persero) Tbk - Indonesia
- Samtan Co., Ltd - South Korea
- Kohat Cement Company Ltd. - Pakistan
- Indika Energy - Indonesia
- Bukit Makmur.PT - Indonesia
- Coal and Oil Company - UAE
- Altura Mining Limited, Indonesia
- Maheswari Brothers Coal Limited - India
- CIMB Investment Bank - Malaysia
- Ministry of Mines - Canada
- Jorong Barutama Greston.PT - Indonesia
- Ministry of Transport, Egypt
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Central Electricity Authority - India
- GVK Power & Infra Limited - India
- Port Waratah Coal Services - Australia
- Latin American Coal - Colombia
- Kalimantan Lumbung Energi - Indonesia
- Lanco Infratech Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Cement Manufacturers Association - India
- Economic Council, Georgia
- Antam Resourcindo - Indonesia
- ICICI Bank Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Kartika Selabumi Mining - Indonesia
- Mjunction Services Limited - India
- Timah Investasi Mineral - Indoneisa
- GN Power Mariveles Coal Plant, Philippines
- Star Paper Mills Limited - India
- Power Finance Corporation Ltd., India
- Minerals Council of Australia
- McConnell Dowell - Australia
- Kideco Jaya Agung - Indonesia
- Binh Thuan Hamico - Vietnam
- Toyota Tsusho Corporation, Japan
- Gujarat Sidhee Cement - India
- Central Java Power - Indonesia
- Coalindo Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- White Energy Company Limited
- Petron Corporation, Philippines
- The State Trading Corporation of India Ltd
- Kaltim Prima Coal - Indonesia
- Videocon Industries ltd - India
- Agrawal Coal Company - India
- Parry Sugars Refinery, India
- Alfred C Toepfer International GmbH - Germany
- Metalloyd Limited - United Kingdom
- ASAPP Information Group - India
- South Luzon Thermal Energy Corporation
- GAC Shipping (India) Pvt Ltd
- Merrill Lynch Commodities Europe
- Formosa Plastics Group - Taiwan
- Carbofer General Trading SA - India
- Neyveli Lignite Corporation Ltd, - India
- Sarangani Energy Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Edison Trading Spa - Italy
- New Zealand Coal & Carbon
- Posco Energy - South Korea
- Siam City Cement - Thailand
- Kapuas Tunggal Persada - Indonesia
- Commonwealth Bank - Australia
- PTC India Limited - India
- Ind-Barath Power Infra Limited - India
- Heidelberg Cement - Germany
- Borneo Indobara - Indonesia
- Orica Mining Services - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Xindia Steels Limited - India
- Karaikal Port Pvt Ltd - India
- Mercuria Energy - Indonesia
- London Commodity Brokers - England
- Rio Tinto Coal - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Chamber of Mines of South Africa
- PowerSource Philippines DevCo
- Aditya Birla Group - India
- Indo Tambangraya Megah - Indonesia
- Meenaskhi Energy Private Limited - India
- SMC Global Power, Philippines
- Global Coal Blending Company Limited - Australia
- IEA Clean Coal Centre - UK
- Sindya Power Generating Company Private Ltd
- Iligan Light & Power Inc, Philippines
- Indian Oil Corporation Limited
- Parliament of New Zealand
- Global Business Power Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Bukit Baiduri Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Sree Jayajothi Cements Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Krishnapatnam Port Company Ltd. - India
- IHS Mccloskey Coal Group - USA
- Cigading International Bulk Terminal - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sinarmas Energy and Mining - Indonesia
- Global Green Power PLC Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Romanian Commodities Exchange
- Essar Steel Hazira Ltd - India
- Deloitte Consulting - India
- LBH Netherlands Bv - Netherlands
- Makarim & Taira - Indonesia
- Bhoruka Overseas - Indonesia
- Medco Energi Mining Internasional
- Bayan Resources Tbk. - Indonesia
|
| |
| |
|
