Cement Energy and Environment

India Ltd , Steel Authority of India Ltd, NMDC and others having backward integration, he argued, it would amount to "diverting resources from them and also the Centre" for backward integration, he argued, it would amount to "diverting resources from them and also the Centre" for expenditure by district authorities. Questioning the very logic of a profit-sharing mechanism for any activity, including displacement of people, Ahluwalia said that demands for a similar mechanism could emanate from thermal power projects, hydro projects and railways. "The development impact of such an interpretation and the possible extension of the law to non– mining areas has to be considered," the Plan panel Deputy.Chairman said. Courtesy: FIMI (Federation of Indian Mineral Industries) News Bulletin, 1st April, 2011, Pp32-33. PROFIT SHARING MAY VARY WITH ~~INERAL Faced with strident opposition from the Planning Commission and mining giants, a group of ministers (GoM) headed by finance minister Pranab Muknerjee is mulling a significant dilution of the contentious proposal for mandatory sharing of mining profits with the local people. Instead of imposing a flat rate as a fraction of the profits to be shared for all minerals, the relevant law would allow flexibilities in keeping with the economics of each mineral. The Mines and Minerals (Development & Regulation) Bill that is being discussed by the GaM stipulates that mmmg companies will have to share 26% of their net profit or an amount equivalent to the royalty paid by them to the respective states, whichever is higher, with the local people displaced or affected by the mining activity. Planning Commission deputy chairman Montek Singh Ahluwalia had said this proposal would amount to a very high cumulative royalty burden on the companies and would discourage investments. A senior government official told FE: "It has been discussed (by the GoM) that the 26% profit– sharing norm will be looked at from the viewpoint of the economics of each mineral. If for some mineral 26% is too high, then (the proposed law) will enable it to be changed and bring it within reasonable limits." He added that for minerals like iron ore, where the profit levels are high and risk capital is low, the figure of 26% might be appropriate but in regard to certain other minerals like copper, a more lenient view may have to be taken. In a recent letter to Mukherjee, Ahluwalia said, "If we end up with too high a cumulative royalty burden compared with international standards, this will only discourage future investments in the mining sector. We cannot assume that the additional burden can simply be passed on to the consumer, since these minerals are freely importable and users will switch to imports." In fact, the Plan panel is of the view that companies should only share 26% of the royalty with local people, instead of the same fraction of net profits. In broader terms, government can reduce the profit-sharing ratio for rare metals like gold, while keeping it at 26% for widely-used minerals like iron ore and bauxite. The proposed legislation is aimed at bringing more investment from private players into the mining sector. It is awaiting the vetting by the 10-member GoM before it can be tabled in Parliament. The Bill was earlier supposed to be introduced in the budget session that 25 March 2011 . Now, it is expected to be tabled in the upcoming monsoon session. Courtesy : The Financial Express, New Delhi, 2ffh March 2011 PROFIT-SHARING NORM IN MINING BILL MAY GO The government is likely to dilute a provision in an upcoming legislation on mining that would have required companies to share profits with local communities, according to two people familiar with the issue. Instead, miners may be asked to pay higher royalty - a tax calculated as a percentage of price. Vehement opposition from industry, coupled with the fact that profits from mining operations could be difficult to calculate in many cases, has brought about the change in the government's thinking, the people said. A final decision on the legislation - the Mines and Minerals (Development and Regulation) Bill - which is currently being considered by a group of ministers, has not yet been taken, they said. The profit-sharing clause is likely to be replaced by higher royalty or even a mixture of profit share and royalty, said the people aware of the changes being suggested. The current royalty rate for iron ore is 10 per cent. Revenues garnered for royalty go to state governments. The difficulty in calculating profit is 16