Lower coal, mineral consumption in India to hit government revenue — report

The Centre and key mineral producing states are likely to incur a revenue loss of up to Rs 12,000 crore in FY21 due to lower coal and mineral consumption during the coronavirus lockdown, a KPMG report said.

“As per our estimates, the top five mineral producing states are likely to see an impact of around Rs 3,000-3,500 crore in all, due to decline in offtake of minerals, other than coal.

“Correspondingly, just from these 5 states (Odisha, Rajasthan, Chhattisgarh, Andhra Pradesh and Karnataka) the Central government is also expected to lose Rs 1,000-1,500 crore – as its share of taxes such as NMET, CGST and Corporate tax – due to fall in mineral sales (excluding coal) in these 5 states,” KPMG in India said in its thought paper titled ‘Impact of COVID-19 on the mining sector in India’.

With regard to coal producing states, it said “the overall losses incurred by all the state governments combined is estimated to be around Rs 4,500 – 5,000 crore. And the overall loss that the central government would be facing in FY21 is estimated to be around Rs 1,800 – Rs 2,000 crore.”

“Considering the scenario at the end-use consumption side, reduced construction activities is likely to lead to a reduction in the consumption of steel and cement in FY21, thereby affecting the production of iron ore and limestone respectively

“Similarly, slowdown in manufacturing activities in the industrial sector is likely to impact coal fired power generation, thereby hitting the production of, and royalties and taxes from, thermal coal,” it said. It further said the government’s plan to auction new coal and mineral blocks is likely to get delayed due to COVID-19.

“Apart from health, at the core of the recovery process from COVID-19 lies employment and revenue generation for central and state governments. “Mining addresses those needs strongly, hence there is understandable emphasis on opening up the sector. The discontinuity caused by COVID-19 provides the opportunity to deal with longstanding problems in the sector and unshackle its development,” said Anish De, Partner and Head – Energy and Natural Resources, KPMG in India.

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