The group of ministers (GoM) on mines and minerals (development & regulation) Bill has proposed that corporate groups spread over different sectors should have separate accounts for mining-related activities in order to facilitate sharing of their mining profits with the locals.
It said one way of calculating profit from mining operations will be by separating expenses from mining operations, including if a company has sold the metal at sale price determined by prevailing market price or the notional profit of the quantity of ore transferred to their plants.
The GoM headed by finance minister Pranab Mukherjee reckons that this proposal would help it overcome the opposition to the formula of sharing 26% of the mining profit with the affected people.
A government official who did not wish to be named said that ministry has proposed corporate groups such as Tatas which have business spread out in different sectors to have separate financial accounting on mining-related operations for profit sharing. Since most private miners have a transfer price between mines and their integrated plant, the profit cannot be calculated just based on the mineral production.
In some cases their will be apportionment system based on set criteria to separate integrated activities from the mining operations. Since the profit is of previous year and has been budgeted in the current year as the committed liability, it will not be a burden on the company’s balance sheet.
In the proposal, 26% of profit after tax from the mining-related operations of the firm will be collected at the district level. The fund will be managed by a trust which will have district administration representatives, mining company and the affected people.
The new mining Bill proposes that miners set aside 26% of their previous year’s net profit from mining operations for the benefit of the people displaced. Most of the firms which produce metals and have captive mines will have to create separate accounting standards, the official said.
Tata and another three companies had raised some reservations but later they felt this is workable, the official said, adding that the GoM also approved of it.
The importance of the profit sharing mechanism was realised when the proposal of Anil Aggarwal-led Vedanta Resources to start mining in Niyamgiri was rejected by the environment ministry amid strong protests from local tribals claiming that it will adversely affect their livelihood.
Although steel minister Virbhadra Singh had advocated for giving public sector companies some relief, the official said government is unlikely to differentiate between corporates and PSUs. The draft within this week will go the law ministry to get its approval. In case it has no further changes to make, then it will go to the cabinet.
It said one way of calculating profit from mining operations will be by separating expenses from mining operations, including if a company has sold the metal at sale price determined by prevailing market price or the notional profit of the quantity of ore transferred to their plants.
The GoM headed by finance minister Pranab Mukherjee reckons that this proposal would help it overcome the opposition to the formula of sharing 26% of the mining profit with the affected people.
A government official who did not wish to be named said that ministry has proposed corporate groups such as Tatas which have business spread out in different sectors to have separate financial accounting on mining-related operations for profit sharing. Since most private miners have a transfer price between mines and their integrated plant, the profit cannot be calculated just based on the mineral production.
In some cases their will be apportionment system based on set criteria to separate integrated activities from the mining operations. Since the profit is of previous year and has been budgeted in the current year as the committed liability, it will not be a burden on the company’s balance sheet.
In the proposal, 26% of profit after tax from the mining-related operations of the firm will be collected at the district level. The fund will be managed by a trust which will have district administration representatives, mining company and the affected people.
The new mining Bill proposes that miners set aside 26% of their previous year’s net profit from mining operations for the benefit of the people displaced. Most of the firms which produce metals and have captive mines will have to create separate accounting standards, the official said.
Tata and another three companies had raised some reservations but later they felt this is workable, the official said, adding that the GoM also approved of it.
The importance of the profit sharing mechanism was realised when the proposal of Anil Aggarwal-led Vedanta Resources to start mining in Niyamgiri was rejected by the environment ministry amid strong protests from local tribals claiming that it will adversely affect their livelihood.
Although steel minister Virbhadra Singh had advocated for giving public sector companies some relief, the official said government is unlikely to differentiate between corporates and PSUs. The draft within this week will go the law ministry to get its approval. In case it has no further changes to make, then it will go to the cabinet.
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