India’s FIMI seeks slew of tax incentives to revive domestic mineral industry

KOLKATA (miningweekly.com) – The Federation of Indian Mineral Industries (FIMI) is seeking a slew of indirect tax incentives to revive the moribund mining industry.

FIMI has submitted a list of changes in indirect tax levies on various mineral and mining products in a memorandum to the Finance Ministry, seeking their incorporation in the national Budget to be placed before the Indian Parliament next month.

Top of its wish list is the scrapping of the 30% export tax on iron-ore exports, which is currently applicable for all outward shipments of grades with an iron content 58% and above.

The miners’ body has pointed out that the export tax has been progressively increased from nil in 2009 to 5% in 2010, 20% in 2011 and finally to 30% in December of the same year, rendering Indian iron-ore exports unviable in international markets.

Owing to the high export duty on iron-ore, outward shipments have been steadily declining from 117.37-million tons in 2009/10 to 4.50-million tons in 2015/16. That lower export tax triggers higher exports is evident from the fact that the government withdrew the export tax on iron-ore grades of 58% and below in 2016/17 and in the very same year, exports increased to 30.48-million tons, FIMI said in its communication to the Finance Ministry.

However, with the changing preference of international buyers towards higher grade iron-ore fines, Indian exports fell sharply in 2018/19 to 16.19-million tons and Indian miners have been unable to push higher grade iron-ore fines to overseas buyers owing to high tax on such grades.

Providing data, the miners said that as of March 31, 2019, there was a stockpile of 162.85-million tons at mine-heads, mainly in states like Odisha and Jharkhand, with the bulk of this volume being of iron content of 58% and up, attracting a 30% tax, which prevented miners competing in international markets, FIMI said.

Along the same lines, FIMI has sought scrapping of the 15% export tax on bauxite. It has argued that India having 3.896-billion tons of bauxite reserves, the fifth largest in the world, and 84% of the reserves being of the metallurgical grade used mainly for alumina extraction, it is necessary to have optimal conservation of these bauxite deposits. With large capacity aluminium smelters having been commissioned for utilisation of metallurgical grade bauxite, there are, as such, limited avenues for use of non plant grade bauxite with alumina content of 38% to 40%, found largely in the western state of Gujarat.

FIMI maintained that since low-grade bauxite availability exceeded domestic demand, it was historically exported until the imposition of a flat rate of 15% export duty. Indian bauxite exports during 2015/16 were 8.91-million tons, which declined sharply to 1.56-million tons in 2018/19 when the tax was imposed and further to 0.36-million tons in the current financial year.

The miners’ body has also sought a correction in the "inverted basic customs duty" on critical raw materials for aluminium production wherein the existing structure of higher duties on inputs compared to finished product was making domestic aluminium producers uncompetitive.

The average production cost of Indian aluminium producers is among the highest in the world, with FIMI observing that China promotes value addition through nil customs duty on materials used for aluminium production. On the contrary Indian producers heavily dependent on imported inputs have to pay high customs duties making their finished products uncompetitive against imported finished products.

Hence, FIMI has sought reduction of import duties on calcined petroleum from 10% to 2.5%, caustic soda lye from 7.5% to 2.5%, aluminium floride from 7.5% to 2.5%, coal tar pitch from 7.5% to 2.5% and that on green anode/pre-baked carbon anode from 5% to 2.5%.

While this would enable domestic alumimium producers to lower cost of production, FIMI has sought import protection for domestic producers, seeking an increase in basic customs duty on aluminium metal from 7.5% at present to 10%.