National Mineral Policy 2006 - Department of Mines

developed, controlled, and run by stand alone prospectors and miners, the policy of thesestates is proving to be a substantial dampener on the investment and growth prospects of themining sector. The Committee carefully examined the presentations from the mineral-richstates in support of the conditionality of value addition as well as the submissions from theindustry opposing the approach. The policy is also objected to by those states that aredeficient in mineral resources but provide an environment more conducive for theestablishment of end-use industry. For releasing the vast potential of India’s mining industryit is important to resolve this issue.PROS AND CONS OF VALUE ADDITION AS A CONDITION FOR MININGCONCESSION5.3 The arguments in favour of the requirement for value addition can be summarised asfollows. Minerals belong to the state in which they occur. It so happens that India’s mainmineral-rich states are relatively less industrialised than others. The poor but mineral-richstates would like to maximise the economic return from their mineral resources by usingmineral concessions as a tool for attracting industry. For many years, states have beencompeting with each other for attracting industry by granting various incentives, mainly inthe form of sales tax concessions. With the introduction of state Value Added Tax (VAT), thesales tax exemption option for granting incentives has been closed and states are struggling tofind other ways in which industries can be incentivised to get established within theirterritories. Mineral concessions, especially MLs for exploiting proven ore bodies explored bystate agencies at public expense, can be leveraged to locate an industrial unit in the statewhere the resource is mined.5.4 Another important argument in favour of value addition within the state is thatmineral-owning states need to find a way in which they can increase their financial resourcesfrom the exploitation of minerals. The current dispensation allows virtually free mineralconcessions and the royalty paid is very meagre. Downstream industries not only generateadditional economic activity and employment but also widen the base for collection of taxes.This issue is dealt with in detail in Chapter 6, which suggests various ways in which thestates’ revenues should be augmented.112