(Minews) - The Indian cabinet’s approval of increased royalty rates on minerals including iron ore, copper and bauxite yesterday will raise costs for miners and metal producers, analysts and company officials said.
The royalty on iron ore will be increased to 15 percent of sales from 10 percent, while bauxite, used to make alumina and aluminum will attract 0.6 percent royalty from 0.5 percent, according to government documents obtained by Bloomberg News. The tax on copper will go up to 4.62 percent from 4.2 percent. The revised rates will take effect after the federal government notifies the changes, said R.K. Sharma, secretary general at Federation of Indian Mineral Industries.
An increase in fees will lead to a higher mining costs and may force metal producers, including Steel Authority of India Ltd., Tata Steel (TATA) Ltd. and NMDC Ltd., to pass on the burden to consumers.
“Steel companies are already severely impacted because of ore shortages and the rupee’s depreciation in the past three months,” said Seshagiri Rao, group chief financial officer at Mumbai-based JSW Steel Ltd. “Royalty will add to the cost burden.”
The additional royalty on iron ore will lead to a cost increase of 250 rupees ($4) a metric ton for the steelmaker, Rao said. The company will decide on whether to pass on the cost at the end of the month, he said.
Steel Authority led a decline among metal producers today, falling 3.2 percent to 83.90 rupees in Mumbai, while Tata Steel fell 1.6 percent to 536.60 rupees. Sesa Sterlite Ltd., India’s biggest zinc producer, dropped 1.8 percent to 289.85 rupees.
