National Mineral Policy 2006 - Department of Mines

stealing of public property and should be a non-bailable, cognisable criminal offence,for which, in the mineral-rich states, there should be special courts. [6.22]FISCAL REGIME AND ITS STABILITY• The constitutionality of the issue of whether the states can impose a cess on anymineral for which a royalty has been prescribed is currently under judicial scrutiny.The Committee would nevertheless observe that in considering the imposition of sucha cess in future, state governments should bear in mind the adverse impact on theinvestment environment in the state. [6.23]• To encourage exploration, which is a pre-mining activity, the Committee wouldrecommend that the current restriction of four years for allowing deduction ofexpenditure on exploration and development from the income tax should beeliminated. All expenditure on exploration and development in the preceding 10 yearsbefore the commencement of commercial production should be allowed for deductionin mining operations. Further, the mining companies should be given the option toclaim deduction either in the first 10 years of commercial production or during theuseful life of the mine. Clarity also needs to be brought in Section 35E of the IncomeTax Act, 1961 for set-off of unsuccessful exploration cost. [6.25]OTHER SOURCES OF REVENUE• A conscious decision needs to be taken to encourage physical value addition whichimproves ore quality and usage at pit mouth such as concentration, beneficiation,calibration, blending, etc. Wherever the miner adds value through these processes theroyalty may be charged on the ore at pit mouth on the cost of extraction beforeprocessing. Alternatively, the ad valorem rate for beneficiated or concentrated oreshould be proportionately lower, as in the case of beneficiated iron ore in WesternAustralia. [6.26]• The penalty for non-payment of royalty is cancellation of the concession. Amoratorium or a suitable structure for deferment of royalty payment to supportinvestment in deserving cases, to be spelt out clearly in the MCR, could also bepermitted in deserving cases. [6.26]215