With the debate over sharing of 26 per cent profit from mining with people displaced by mining projects still raging, the government on Tuesday said integrated steelmakers would be asked to demarcate their mining and steel operations and keep separate accounts so that the standalone profit from mining could be ascertained.
Integrated steelmakers led by state-run Steel Authority of India Ltd have opposed the profit sharing clause in the new mining bill citing impracticality.
SAIL and Tata Steel, the country’s two largest steelmakers, have full captive mining operations in iron ore. The companies, however, do not maintain separate financial accounts.
“They (integrated steelmakers) will have to set up separate entities for mining and steelmaking,” said PK Misra, secretary, Ministry of Steel. “People who are settled there (mining areas) will become more positive towards mining if they have a stake in the process...If there is any impact on profitability, it will only be in the short term.”
Standalone mining operations are much more profitable in the country than steelmaking even as mining remains one of the more heavily taxed industries.
SAIL and Tata Steel, for example, had an operating margin of only 28.74 per cent and 39.19 per cent in 2009-10. For non-captive steel companies like JSW Steel, the figure drops to 26.24 per cent. Mining companies like National Mineral Development Corporation and Sesa Goa, on the other hand, enjoyed operating margins of 84.7 per cent and 59.7 per cent respectively.
While SAIL refused to comment, Tata Steel has already said it is willing to share revenue but not as a percentage of profit but as a part of overall operational costs.
“Profit can be impacted by several factors. Whereas when it is is treated as a part of the operating cots, it will be consistent, transparent and sustainable through the life of the mine,” said Partha Sengupta, vice-president, raw materials, Tata Steel.
With the industry still largely opposed to profit sharing, the enactment of the bill itself could see some delay.
“The bill still has to go through a lot of process and there are several issues that need to be thrashed out,” Misra said while addressing a seminar at industry chamber FICCI.