Double whammy for mining companies

JAIPUR: At a time when mining companies are battling out with global meltdown, the increased mining royalties has served a double whammy on them. The cost of production is set to go up affecting the inflation rate. Zinc producer Hindustan Zinc Limited chief operating officer Akhilesh Joshi told ET that the increased royalties would affect our competitiveness in global market. ���The royalty rates have been revised from 6.6% on zinc ore to 8% while for lead ore the rise is from 5% to 7.5%. The royalty rates for zinc concentrate and lead concentrate have been fixed at 8.4% and 12.5% respectively. We can���t raise the price of metal to compensate on the cost of production. Increase in Royalty would definitely affect industry to some extent at this point of recession,��� he said.

Hindustan Zinc mines about 7.5 lakh tonnes of lead and zinc ore annually worth about Rs. 5680 crore. The contribution to exchequer is Rs 1408 crore with Rs 366 crore going to state government and remaining to the central government.

The royalty rates on Zinc and Lead in the country are among the highest across the world. While China and Brazil levy royalty at 2% of sales revenue, Australia and Canada have fixed it at 5%. ���There is a big difference in the royalty rates. Apart from that, mining companies in India have to pay a number of taxes like land tax, surface rent tax etc. How can we be competitive in global market?��� asks a senior HZL officer who doesn���t want to be quoted.