High tax on mining activites in Karnataka hinder steel sector growth, says Kumaraswamy

Kumaraswamy held a meeting with Union Law Minister Arjun Ram Meghwal in New Delhi to discuss the adverse impact of the additional taxation imposed by the Karnataka government on mining activities.

New Delhi: Union Minister of Steel and Heavy Industries H D  Kumaraswamy on Thursday said that additional tax imposed by the Karnataka government on mining activities will have negative impact on the growth of mining and steel sectors.  

Kumaraswamy held a meeting with Union Law Minister Arjun Ram Meghwal here to discuss the adverse impact of the additional taxation imposed by the Karnataka government on mining activities. 

The meeting was attended by Steel Ministry Secretary Sandeep Poundrik, NMDC Chairman Amitava Mukherjee, senior officials from the Law Ministry, and top representatives of various mining companies, said a statement from the Steel Minister office. 

Karnataka imposed three times more tax on mining activities which were three times more than the national average. Since the target of producing 300 million tonne of steel annually by 2030 in India, high tax on sector would hurts, the statement said. 

Echoing Kumaraswamy’s view , Meghwal added, “To realise the Prime Minister’s dream, we must take collective measures to ensure the same.”  the statement added. 

The nine-judge Supreme Court Constitution Bench earlier held that the ‘royalty’ collected by state governments under Section 9 of the Mines and Minerals (Development & Regulation) Act, 1957 (MMDRA) is not a tax.

The decision paved the way for states to impose additional taxes on mining operations within their territories. 

Karnataka has already taken steps in this direction by approving the Karnataka Minor Minerals Rules (2024) on December 6, projecting additional revenue of over Rs 4,700 crore from the sector.  

Under the revised rules, the royalty on mining stone and minor minerals has been raised to Rs 80 from Rs 70 per tonne in Karnataka. The rules, which are reviewed every three years, also allow for differential tax rates based on the category of mines while maintaining uniform rates for leases within the same category. 

The industry apprehending that more states may follow Karnataka’s lead, significantly raising input costs for mining operations. 

State-owned NMDC Ltd, along with private mining giants Vedanta Ltd and Sandur Manganese and Iron Ores Ltd, are the largest operators of pre-auction era mines in Karnataka and will bear the brunt of the proposed tax.