COAL & MINES

Union Budget 2020 expectations: Metals and Mining

Another year went by and many wishes remain unfulfilled. Next year there will be even lesser fiscal space to pull off anything significant for the metals and mining sector. There was some talk that the GST compensation cess on coal might be removed ahead of plan.

While it could bring down the cost of power by approximately 20 – 25 paise/KwH, this was anyway a temporary measure. One can, however, look forward to some kind of demand stimulus for the economy leading to an impetus to the automotive and construction sector which in turn will have a trickle-down effect on the mining and metals industry.

Pre-budget confidence-building measures like the INR 102 lakh crore National Infrastructure Pipeline and the very recent Mining Laws (Amendment) Ordinance 2020 have raised hopes of the sector.

Since the fiscal space is limited, there is very little likelihood that long-standing demands like reduction of import duty on coking coal will be heeded. However, one could think of some actions aimed at incentivising economic activity which in turn would raise gross revenues for the government:

  • Next year commercial coal block auction is expected. India imports a lot of mining equipment. Globally the slow-down in coal has created excess capacity. Allowing used equipment to come into the country without undue taxes could help India lower its cost of coal.
  • Thanks to MMDR Amendment Act 2015, several mining leases are set to expire on 31 March 2020. Early indications are that iron ore leases will be keenly contested leading to high auction premium. It is very unlikely that merchant mining will remain a very profitable business. Over a period of time, merchant mining as an industry will lose out to captive mining. In light of that, Hon’ble finance minister may consider extending the 15 per cent corporate tax rate for new mining players too, in line with the facility extended to new manufacturing players.
Source
ET Energy World
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