Australian iron ore, coal will cost India more

Indian companies sourcing raw material like iron ore and coal from Australia will now have to shell out extra dollars as the Australia Senate has finally pushed through a law to impose a 30 percent mining tax on the companies.

The Australian government had earlier planned to impose a tax of 40 percent, but an outcry among the mining companies prevented it from doing so. The new prime minister, Julia Gillard managed to strike a deal with the mining companies who will now be taxed at a rate of 30 percent.

Apart from Indian companies who source the raw material from Australia, there are few who already have mines in that country.

Lanco Infra acquired Griffin Coal a year back, when there was no such tax. Gautam Adani has put in $3 billion for coal mining in Queensland. Some of the other countries that have an interest in Australia are GVK Power, Jindal, NMDC among others.

Indian importers will however be relieved to some extent after the Finance Minister removed import duty on thermal coal, which was earlier charged at 5.1 percent.

Earlier Indian companies were impacted after Indonesia imposed an export tax on coal from that country. Indonesia, apart from imposing a tax also, banned export of certain grades of coal. Indian government has made a representation to the Indonesian government to reconsider the tax, which has impacted the viability of many Indian power projects.

India too is considering imposing a tax in line with that of Australia. A government task force has been set up comprising of steel, mines, forest and environment ministries for working out modalities for levy of a Forest Development Tax (FDT) on minerals mined from forest region. The FDT proposal comes in wake of a demand raised by several provinces like Orissa for the levy of a mineral resource rent tax (MRRT), to impose a tax of minimum of 50 percent of profits earned by miners.

With governments across the globe raising taxes on mined products, downstream industries like metals and power will be hit severely, as with the economy slowdown they will not be in a position to pass on the extra cost completely.