Centre opposes states’ levy on minerals, says will lead to inflation, hurt economy | Latest News India - Hindustan Times
close_game
close_game

Centre opposes states’ levy on minerals, says will lead to inflation, hurt economy

ByAbraham Thomas
Feb 29, 2024 02:35 PM IST

The Centre argued that extraction and management of minerals should be guided by national goals to ensure sustained economic growth across the nation

NEW DELHI: Allowing states to levy tax on minerals besides the royalty imposed by the Centre will affect national interest, impact the overall development of the economy and lead to inflation as minerals are important raw materials for core sectors of the economy, the Union ministry of mines has told a nine-judge bench of the Supreme Court in an affidavit filed on February 26.

The Centre said allowing states to charge cess or tax on minerals under the pretext of a tax on mineral-bearing land would increase the price of minerals and fuel inflation. (AFP FILE)
The Centre said allowing states to charge cess or tax on minerals under the pretext of a tax on mineral-bearing land would increase the price of minerals and fuel inflation. (AFP FILE)

The affidavit reasoned that since minerals were concentrated in a few states but critical for industrial and economic development across states, their extraction and management were to be guided by national goals to ensure sustained economic growth across the nation.

HT launches Crick-it, a one stop destination to catch Cricket, anytime, anywhere. Explore now!

The Centre said allowing states to charge cess or tax on minerals under the pretext of a tax on mineral-bearing land would increase the price of minerals and fuel inflation.

“Since minerals are important raw materiasl for key sectors of economy such as power, steel, cement, aluminium, etc, any increase in the price of these minerals on account of additional cess by states will fuel inflation in the country,” said the affidavit filed before a nine-judge bench headed by chief justice of India (CJI) Dhananjaya Y Chandrachud.

The bench has been constituted to answer a set of 11 questions, key among which relate to the nature of royalty being a tax and the state’s power to levy additional cess or tax in addition to the royalty imposed by the Centre under the Mines and Minerals (Development and Regulation) Act, 1957.

A host of state laws levying taxes on mineral-bearing lands are under challenge before the bench, also comprising justices Hrishikesh Roy, AS Oka, BV Nagarathna, JB Pardiwala, Manoj Misra, Ujjal Bhuyan, Satish Chandra Sharma and Augustine George Masih.

Defending its exclusive jurisdiction to levy royalty on mineral rights under Entry 54 of List I, the Centre said that a non-harmonised fiscal regime in mineral rights cannot be envisaged considering that mineral production is concentrated in the hands of a few states.

Over 78% of coal resources are in Odisha, Jharkhand, Chhattisgarh and West Bengal while 90% of iron ore is produced by four states – Chhattisgarh, Jharkhand, Odisha and Karnataka, the affidavit said, citing the National Minerals Inventory. Similarly, Karnataka, Odisha, Madhya Pradesh and Maharashtra account for 82% of manganese produced in the country, over 95% of chromite comes from Odisha alone, and about 73% of bauxite is generated by Andhra Pradesh, Odisha and Chhattisgarh.

A non-harmonised fiscal regime, with varied levies across states, would result in a scenario where industries located in states with lesser mineral deposits would be forced to procure mineral raw materials at higher prices from states endowed with rich mineral states, placing the latter category of states at a significant economic advantage that would come at the cost of the national interest in maximising economic development from the nation’s mineral wealth, the affidavit said.

On the other hand, a uniform levy of royalty prescribed by the Union government under MMDRA Act levels the playing field, thereby promoting domestic industry across the nation in an equitable manner and ensuring revenue generation for states.

The Centre argued that uniform royalty would lead to predictability and availability of raw materials at reasonable and competitive prices and would reduce the dependence of domestic industry on imports. At the same time, “Varied state taxes would drive up prices and inevitably increase export dependence...Differing levies across states would discourage investment in this sector and stem the inflow of foreign exchange.”

The affidavit added that the power to prescribe and collect any fiscal levy in connection with grant of a lease was reserved by Parliament for exercise by central government.

State governments, such as Jharkhand, Odisha, West Bengal and Chhattisgarh, among others have defended the levy of their taxes relying on Entry 49 of List II (taxes on lands and buildings).

Critical industries in the infrastructure sector such as power, steel, cement, and aluminium are heavily dependent on minerals such as coal, iron ore, bauxite, limestone, etc. Under MMDRA, the Centre argued that it has power coupled with a duty to advance “national public interest” by ensuring harmonised mineral development (and consequent economic development) rather than creating “localised pockets of mineral resources-driven growth.”

Discover the complete story of India's general elections on our exclusive Elections Product! Access all the content absolutely free on the HT App. Download now!

Get Current Updates on India News, Elections 2024, Election 2024 Date along with Latest News and Top Headlines from India and around the world.
SHARE THIS ARTICLE ON
Share this article
SHARE
Story Saved
Live Score
OPEN APP
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Sunday, April 21, 2024
Start 14 Days Free Trial Subscribe Now
Follow Us On