The Centre will take a "closer look" into Odisha chief minister Naveen Patnaik's allegation that mining industry is earning "super normal profits" at the cost of the state, as well as his demand for a 50% mineral resource windfall tax.
"That the iron ore mining industry earning profits cannot be disputed, but whether it is earning super profit to the detriment of the state government is an issue that may need closer look, especially so in Odisha where mining infrastructure is poor," mines minister Dinsha Patel has said in a letter to Patnaik.
Patel, in a letter sent to Patnaik last week, said, "This issue would be taken up by the Study Group on Royalty and Dead Rent... where the state government of Odisha is also a member."
Patnaik has been seeking 50% share of the "super normal profit" earned by private mine owners for the state government, alleging that the companies were operating on tribal land without doing justice to the people.
He had also shot off a letter to Prime Minister Manmohan Singh seeking imposition of a 50% mineral resource tax, taking a cue from Australia, which has decided to levy higher taxes on iron ore from July, 2012.
However, mines minister Patel suggested that the new Mines and Minerals (Development and Regulation) Bill, 2011, will address the concerns of the Odisha government.
"On the issue of levy of a super profit tax similar to the Mineral Resource Rent Tax of Australia, let me point out... the government has introduced a new MMDR Bill, 2011, in Parliament in the Winter Session, which would entail that apart from royalty, every miner would be required to pay a sum equal to royalty to a district-level mechanism for payment of annuity to the local population affected by mining," Patel said.
In addition, state governments would be allowed to levy a cess at the rate of up to 10% of the royalty amount for the minerals mined, he said.
"This would directly address the concern of the state government of Odisha that mining benefits should accrue for improving the social and physical infrastructure, strengthen welfare measures, besides improving the livelihood of people of the state, especially the mining districts which really require immediate attention," Patel mentioned in the letter.
Patel also exuded confidence "that the proposed mechanism in the draft Mines and Mineral Development and Regulation Bill for inclusive growth would effectively address your (Patnaik's) concerns, especially considering the fact that historically higher royalty earning per se has not converted into achieving any social objective."