The decision of the Karnataka Governor to return the Mineral Rights Tax Bill 2024 seems to have left the mining sector jubilant with shares prices of major companies like Sandur Manganese and NMDC seeing a surge on Thursday (January 23), but it has effectively dashed the hopes of the Siddaramaiah-led government to rake in fresh revenue.
It seems like the state government has anticipated the move, considering the Centre’s initiatives to soften the blow of taxes that the Bill may have brought on miners and the ‘role’ of Union Steel Minister and JD(S) leader HD Kumaraswamy.
Also read: Royalty on minerals: SC allows states to seek refunds from Centre, mining firms from 2005
What prompted Governor’s move?
The Karnataka cabinet had introduced the Bill following an August 2024 Supreme Court ruling, allowing state governments to impose taxes on minerals retrospectively from 2005. Karnataka Governor Thawar Chand Gehlot’s office, however, returned the proposed legislation on Thursday (January 23), seeking certain ‘clarifications’ from the government.
Though the Governor’s move is set to affect the state government’s initiative to generate an additional revenue of Rs 4,700 crore, it is said to have been based on concerns raised by mining associations, especially the Karnataka Quarry and Stone Crusher Owners Association (KQSCO). KQSCO had demanded rationalisation of royalty collection and certain other clauses.
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The Centre, acting on concerns of mining and steel industries, is reportedly exploring legal options to alleviate the impact of Karnataka’s new levies on minerals. Sources say, this is the reason why the Governor’s office kept the bill – which proposes hefty taxes on mineral rights and lands – on hold for more than a month before sending it back.
Mining revenue goals
Karnataka has set a target to generate nearly Rs 11,000 crore revenue from the mining sector. On December 6 2024, the Cabinet approved the Karnataka (Mineral Rights and Mineral Bearing Land) Tax Bill, which will allow the government to levy taxes with retrospective effect on mineral rights and the owners of mineral-bearing lands. While this will fetch the government an additional revenue of Rs 4,713 crore, Rs 6,105 crore will come from penalties from violators and Rs 1,221 crore in the form of royalty.
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Maiden initiative
The Bill was introduced in the state legislature on December 16. HK Patil, the state Minister for Law and Parliamentary Affairs, clarified that the new tax system will be levied in addition to royalty on the mined minerals. Before this, miners were paying the royalty. Had the bill gotten the Governor’s sanction, it would have mandated the landowners to pay taxes, the rate of which would be assessed depending on the minerals mined.
Karnataka is the first Indian state to have drafted such a bill following the Supreme Court’s verdict.
OTS option
The Supreme Court has also allowed the states to collect taxes on mineral-bearing land and mining rights with retrospective effect from April 1, 2005. In another decision, the government provided a One-Time Settlement (OTS) option to violators, especially those who mined beyond their licensed jurisdiction.
Union Steel Minister Kumaraswamy had said then that additional taxes on miners in Karnataka would have a negative impact on the growth of the sector as well as the steel industry.
Also read: States set to walk thin line between raising revenues and overburdening mining industry
Row over 24X7 mining proposal
The current development comes months after Chief Minister Siddaramaiah proposed the idea of permitting round-the-clock mining operations in forest areas and amending the Forest Conservation Act to exempt iron ore from the forest produce list.
The proposal of the Karnataka government invited criticism not just from environmentalists, but also from senior officials of the Forest Department.
Also read | SC: States have legislative competence to impose taxes on mines, minerals-bearing lands
‘Govt had its apprehensions on Bill’s passage’
However, for the Karnataka government, the development of the Governor’s decision to send back the Bill is hardly suprising.
“Considering the parleying of Kumaraswamy and Union Minister for Law and Justice, Arjun Ram Meghwal, the Karnataka government had its own apprehension over the Governor giving assent to the Bill,” said a senior official at the Department of Mines and Geology.
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