India’s largest iron-ore miner, NMDC Ltd is expecting “minimal impact” from the latest Supreme Court verdict allowing States to retrospectively levy royalty on mines and minerals extracted from their land, the company’s Chairman and Managing Director (additional charge) Amitava Mukherjee, told businessline.
Even if states come up with such charges, there will be a “pass through” indicating it will be recovered from existing customers, he said. So far no State government has raised any demand for payment of royalty on a retrospective basis.
“We do not see any significant impact of the Supreme Court order; in fact, we see minimal impact, if at all any. There will be a pass through even if some demand is raised. We are a merchant miner which restricts our impact,” he said on the side lines of a FICCI event here.
It is being said that merchant miners can recover some of these tax from their existing customers, if they have not changed. If any of the customers have closed operations, then the tax liability falls on the miner.
NMDC currently has iron ore mines in Chhattisgarh and Karnataka, and diamond mines in Panna (Madhya Pradesh).
According to Mukherjee, of the 81 cases that were taken up before the Supreme Court, only one is applicable for NMDC. The company has calculated the impact to be around ₹21-24 crore from its diamond mining operations at Panna.
“If the same principle (of retrospective taxation) is applied, then we may see a tax liability of ₹24 crore for Panna. Rest is a pass through for us,” he explained.
NMDC’s customer base includes ArcelorMittal Nippon Steel (India), JSW Steel, Jindal Steel and Power, Angul, Kalyani Steel, among others.
The miner, which operates four iron ore mines in Chhattisgarh and Karnataka, said that these States are yet to come up with a law or impose demand notices for retrospective royalties.
“There has been no demand from these States,” Mukherjee said.
Legal Tussle
The miner’s existing legal tussle with these State governments pertain to “separate issues”, the CMD explained. The cases include imposition of additional levies, higher royalties and lease renewal conditions.
“Both disputes are separate from the set of 80-odd cases which legally challenged the State authority to impose such taxes,” he added.
As of now, NMDC has a liability of over ₹2,000 crore towards the Karnataka and ₹144 crore towards Chhattisgarh.
“Subsequently, once the principle has been decided, sooner or later, we might have a liability for these as well (Karnataka and Chhattisgarh forest department tax),” Mukherjee had said during a post results call earlier this month.
In case of Chhattisgarh, the company is already recovering it. “So there will be hardly any retrospective effect,” he said.
For Karnataka, it will be substantially more.
“Most of our customer base is the same,” Mukherjee said adding that, “Nothing much has changed over the last 20 years in terms of customer bases. So most of this amount... a very substantial amount, leaving aside a few couple of crore, I think we will be in a position to recover. This is payable if this liability comes.”