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Will the Government Move a Natural Resources Tax / Royalty Bill ?

March 27, 2012

The Supreme Court’s February 2, 2012 judgment on the 2G spectrum scam case and heightened public scrutiny of Government actions practically rule out the awarding of natural resources on a discretionary basis. We can easily conclude that the old process of awarding natural resources, such as coal blocks, mineral ores, Sand, etc on a discretionary basis will come to an end.

Recent Revelations by Investigative Journalists about the Coal Scam in India has made the purpose of the Natural Resources Royalty Tax Bill much stronger than ever. There is a possibility of the Government taxing the profits of companies that (1) had received natural resources for free or below-market prices in the past and (2) sell their products based on the natural resources at market (invariably global) prices. Coal blocks and mineral mines would come in this category.

Some companies have voluntarily proposed imposition of royalty on revenues or tax on profits. But what if the Promoters of the company are a hand in Glove with the State Government in looting the Resource ? BJP Ministers – Janardhana Reddy and Karunkara Reddy in Bellary, Karnataka operated with Congress CM of Andhra Pradesh Late Y S Rajshekar Reddy.

The Government’s intention to implement the Mines and Mineral (Development and Regulation) Bill that specifically contains provisions for a mining tax on profits of companies further strengthen our viewpoint.

India’s evolution to a country with more transparent systems and stronger democratic institutions will eradicate vestiges of an earlier discretion-based system. However, the need of the hour is for the Government to move swiftly to help industrialization. But the opposition and the media are in no mood to let this Government survive as it has the highest number of scams in its crown. What a disgraceful exit to Dr. Manmohan Singh, a silent witness to all the scams 🙂

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