State governments should not tax minerals excessively, says Kishan Reddy

State governments should avoid levying high taxes on minerals to ensure that end-products such as steel and cement do not become more expensive, union mines minister G Kishan Reddy said on Thursday.

His comment comes in the backdrop of a Supreme Court verdict, allowing states to levy additional taxes on mining operations in their territory.

The decision seems to have opened a Pandora's box with states such as Karnataka deciding to impose fresh levies on mining operations, hoping to generate additional revenue of roughly ₹4,700 crore from the sector.


Addressing a press conference on the Indian mining sector, Reddy said that while states can now levy higher taxes, it should be avoided due to the adverse impact on consumers,

“If state governments increase taxes on coal and other minerals, the burden is borne by power consumers, agricultural and industrial users. Cement and steel among other sectors will also be impacted,” he said.

The minister said the Centre is not in favour of excessive taxation to safeguard public interest. “The government does not earn any revenue from mining activities,” he said. “We urge the state governments to be pragmatic.”

Mines secretary V L Kantha Rao said the Centre has asked states to set up a stable regime for taxing minerals so that companies have better certainty regarding royalty when starting operations.

The Centre has also requested a review of the Supreme Court verdict, Rao said.

ET reported in January that the Centre will consult states to curb excessive taxation on mining operations, addressing concerns from the sector.

Rao also played down the impact of US President Donald Trump imposing 25% additional tariff on steel and aluminium imports and likely tariffs on copper on Indian metal producers. “We are an exporter of aluminium and steel, and an importer of copper... We have a significant cost advantage,” he said in response to a query.

Reddy said more states are going to award mines through auctions. “There are 14 states in the mineral auction regime,” he said. “Assam, Jammu and Kashmir, and Kerala will soon join too.”

Reddy said this will lead to job creation and higher revenues in these states.

The auction of exploration block licenses will be launched next month, the minister said.