The ruling directly impacts companies having
large-scale mining operations across mineral-rich states like Jharkhand,
Odisha, and Chhattisgarh, which means public sector entities like Coal India,
Steel Authority of India (SAIL), National Mineral Development Corp (NMDC) and
Tata Steel could face higher payouts due to their extensive and long-standing
mining operations.
Aishwarya Nair & Shiladitya Pandit
The recent Supreme Court ruling,
allowing state governments to retrospectively impose taxes on mining activities
dating back to April 1, 2005, has fanned concerns over potential hikes in metal
prices and consumer costs, with analysts warning that the decision could
contribute to rising inflation, potentially delaying any anticipated rate cuts.
In the
August 14 ruling, the SC allowed states to recover past tax dues without
any interest which are to be paid over the next 12 years starting next
financial year. This directly impacts companies having large-scale mining
operations across mineral-rich states like Jharkhand, Odisha, and Chhattisgarh,
which means public sector entities like Coal India, Steel Authority of
India (SAIL), National Mineral Development Corp (NMDC) and Tata Steel could
face higher payouts due to their extensive and long-standing mining
operations. So far, only Tata Steel has been vocal about its outstanding dues
to Odisha government, which is Rs 17,000 crore, roughly 9.3 percent of the
steelmaker's market cap. A top mining body has predicted the payouts to
be as much as Rs 2 lakh crore.
"The
specifics of these taxes, once clarified, will undoubtedly lead to increased
mining costs and, consequently, higher metal costs—potentially triggering
broader inflationary trends. Despite some mitigations, such as the staggering
of payments over 12 years and exemptions on penalties, the judgment arrives at
a challenging time," said Rakesh Surana, Partner, Deloitte
India. Another analyst Vikram Kasat from Prabhudas Lilladher also
flagged similar concerns.
"This
ruling could also impact cement companies and may contribute to rising
inflation, which in turn could delay potential rate cuts," Kasat
said.