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The Federation of Indian Mineral Industries (FIMI) has opposed the proposed changes in the National Mineral Index (NMI). According to a letter from FIMI to the Centre, the proposal to include price of iron-ore from captive mines in the calculation of the NMI will lead to a loss of ₹4.03 lakh crore to the exchequer.
This is because the estimated average sale price of minerals would be substantially reduced if non-arm’s length transactions, as conducted by captive mines, are included in the calculation of the nationwide index. According to FIMI, the current average sale price (ASP) of iron-ore is ₹2,000 a tonne from merchant mines. But the sale price reported by captive mines is just around ₹375 a tonne.
Captive miners report such low sale prices because they are the end users or buyers of the minerals they extract. The merchant miners need to sell them in the open market so that they earn a margin on the sale price.
Merchant miners pay their contributions to the exchequer based on current ASP from merchant mines. Once the price reported by captive mines is also included in the calculation, the overall average would come down.
FIMI said the Government is expected to receive ₹1.98 lakh crore per the present Average Sale Price (ASP) system on account of Royalty, District Mineral Fund (DMF) and National Mineral Exploration Trust (NMET) contributions. This would reduce to ₹0.79 lakh crore after the proposed changes. The estimated loss of Royalty, DMF and NMET to the Exchequer over the lease period of 50 years works out to be ₹1.19 lakh crore.
Under present system of Average Sale Price (ASP), only arm’s length transactions from merchant mines are considered. If the Government considers non-arm’s length captive prices, loss of auction revenue to the exchequer over the lease period of 50 years works out to be ₹2.84 lakh crore, according to FIMI.
“If the Government considers including captive prices in ASP or NMI, the loss to State exchequer on account of Royalty, DMF and NMET will be ₹1.19 lakh crore and the loss of revenue on account of auction premium will be ₹2.84 lakh crore. Cumulative loss to the State exchequer over the lease period will amount to ₹4.03 lakh crore,” FIMI said.
“As more mines get auctioned, the loss to Exchequer on account of considering captive prices will spiral beyond imagination,” FIMI added.
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