Showing posts with label SAIL. Show all posts
Showing posts with label SAIL. Show all posts

Thursday, December 06, 2012

Colour me pink...

As the government relents, steel players must get their house in order

“Don’t put the steel industry between two prongs, where one prong is regulated by the suppliers of raw materials and the other end is held by the regulated prices. This way the steel industry will crash…” said Moosa Raza, President, Indian Steel Alliance (ISA), when B&E interviewed him in March 2008. Though ISA has since dissolved, but Raza’s words are finding resonance today, as all major steel players of the country have, one after the other, posted losses for the third quarter ending December 2008. Will 2009 see the Indian steel sector resurface or drown?

While net profit of Tata Steel and SAIL dipped by 56.36% and 56.4% respectively; JSW Steel recorded a net loss of Rs.1.27 billion as opposed to Rs.3.55 billion during the same period last year. “The losses were mainly due to rise in raw material costs, slackening demand in the home market and foreign exchange fluctuations,” points out a Mumbai-based steel and metal analyst.

The problems with the sector date back to 2007, when India’s iron was being guzzled by China whereas the latter was not allowing its coking coal and coke to be exported to India. This lead to high prices of coking coal and coke (key ingredients in steel manufacturing), which forced steel players to increase selling prices of their products. That’s when the Government of India intervened, unfairly, if you take the steel players’ perspective, and withdrew tax benefits entitled to the steel sector in March 2008. The Government also banned exports and scrapped the Duty Entitlement Pass Book (DEPB) Scheme, which allowed steel players duty-free imports of raw materials equivalent to the value of exports. A drop in demand of steel in the domestic market by sectors such as automotive, construction, et al further worsened the situation. And this is reflective in the current balance sheets of the Indian steel players. If those owning captive mines like Tata and SAIL are facing reversals, imagine the plight of the others.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Saturday, July 28, 2012

Metals, Mines and Troubled Minds

After Nearly two years of Discussions and Delays, The revised MMDR Bill is likely to be placed in The Parliament. Will the protesting locals and industry elements finally find peace? Doubts remain.

After several rounds of deliberations, discussions and interactions, a Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee on July 7, 2011, cleared the draft Mines & Minerals (Development & Regulation) Bill. As per government sources privy to the development, the Mines ministry plans to introduce the bill in the Winter session of Parliament. If passed, the new Mines & Mineral Development & Regulation (MMDR) Act will replace the existing MMDR Act, 1957.

As per the Bill recently cleared by the GoM, the Centre and states can levy cess on all minerals – 2.5% of the royalty in case of the Centre and 10% in case of the states. In addition, mining companies will now have to pay four times the money they presently pay to the states as contribution towards sustainable mine closure plans. The 10-member ministerial panel has said that coal miners should pay 26% of their profits, while other mineral mining firms should give an equivalent of 100% of the royalty they pay the government to compensate people displaced by these projects. However, the mining firms want a royalty-based sharing formula wherein they will have to pay only 26% of the royalty equivalent to the displaced. Sources say the proposal will be discussed further.

Miners in India, who have recently come out of a commodity slump have always been wary that the provisions of the new MMDR Bill, if legislated into an act, will spell doom for the Indian mineral resource industry. If it was any indication, shares of mining firms fell sharply after the panel approved the draft mining Bill, indicating a negative sentiment that the proposed provision for profit-sharing would have a negative impact on the companies’ profits. While Coal India fell 8.2%, Jindal Steel and Power declined by 2.5%, Hindustan Zinc and Sesa Goa by 4.2% each, NMDC by 2.5%, SAIL by 3.7% and Tata Steel by 2%, soon after the GoM paved way for the Bill to be put before the Cabinet.

In an important development, the GoM which vetted the draft Bill, has also given its nod for authorising and incentivising state governments to take up “prospecting and exploration, so that adequately prospected ore bodies can be put on bid.” The new Mining bill will empower state governments to hand out leases, take up prospecting and exploration activities before mines and call for bids for commercial utilisation of mineral deposits such as coal and iron ore. If the proposals become law, companies would need to make an annual cash contribution of Rs.100,000 per hectare to the state government over the life of a mine. This amount would go as contribution for implementing the mine closure plan, key for environmental rehabilitation and in providing succour to workers and communities dependent on mining activity for sustenance. Additionally, the Bill also proposes to give the states a free hand to levy cess on both major and minor minerals by a sum not exceeding 10% of the amount of royalty paid by companies for a particular mineral. Several states including West Bengal were already levying cess and local taxes on minerals at differential rates. The Centre had initially challenged the West Bengal’s move to levy state-specific taxes on coal produced in the state, but a few years ago, a Supreme Court ruling had gone in favour of the state. The Centre therefore, does not share coal royalty proceeds with Bengal. It is pertinent to note here that although the royalty on minerals are levied and collected under the central law, the process of appropriation is actually carried out by the states. As per the GoM, the proposed central cess on minerals would be used for better administration of mining activities.


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