Karnataka New Mining Land Tax: These Listed Companies To Get Impacted?

The Karnataka government has proposed a new mining land tax on iron ore, which could have major implications for major industry players like NMDC, Vedanta , and JSW Steel . The move follows a recent Supreme Court decision that granted state governments the power to impose taxes and levies on minerals and the land from which they are extracted.

The proposed tax measures include a mineral land tax of Rs 100 per tonne on iron ore, effective from January 2005, by the Supreme Court's July 2023 order. Along with this, new rates for taxes on mineral rights have been suggested, which would come into effect starting January 2015.

Impact on Major Miners in Karnataka
Karnataka is the third-largest iron ore-producing state in India, and the new tax measures are expected to affect several key players in the sector. Vedanta and Sandur Manganese are significant iron ore producers in the state, while NMDC sources around 35 per cent of its total production from Karnataka. JSW Steel, which sources a substantial amount of iron ore from NMDC, could also face cost implications.

Cost Implications and Market Shifts
According to analysts, the proposed tax hikes will result in a 22 per cent increase in costs for NMDC, the country’s largest PSU miner. In contrast, private miners could see their costs rise by as much as 45 per cent, which may lead to a shift in volumes from private players to NMDC. This shift could further solidify NMDC’s position in the market.

Key Proposals in the Bill
The new tax structure introduces varying rates based on how mining rights were granted: Non-Auction Mining Rights: For leases granted through non-auction routes, the proposed tax is three times the current royalty paid by miners. 

Public Sector Undertakings (PSUs): For PSUs granted mining rights before 2015, the tax will be three times the royalty for leases that extend up to 50 years. For leases that have completed the 50-year term, the tax will be 1.5 times the royalty. 

Auctioned Mining Rights: The tax on mining rights granted through auctions will be set at Rs 1 per tonne.