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Cabinet approved the MMDR Bill: As per media reports (CNBC,
ET Now), the Cabinet today approved the much awaited New
Mining Bill. The new Mining bill will replace the 1957 Act. While the
Draft Mines & Minerals (Regulation and Development) Bill, 2011 is not
publicly available, as per media reports (CNBC, ET Now) the bill
includes the 2 key clauses- 26% profit sharing for coal miners and
100% royalty equivalent for non-coal miners to be distributed to the
affected parties and spend for local development. It is still not clear
if there are offsets available (CSR spend, social overhead, etc) to this
levy.
Worst case impact on earnings: As highlighted in our note
(“Preliminary Worst Case EPS impact across coverage universe on the
new clauses of the Mining Bill” published on 8th July 2011), in a worst
case scenario the EPS impact is the highest for COAL (~15%
assuming 26% profit sharing on previous year's profits and this
profit sharing is a tax deductible expense), while JSW Steel would be
the least impacted. The EPS impact on other companies are STLT-
~7.5% (large part coming from the zinc subsidiary in India where
royalty rates would double from current 8% of LME); TATA~7%;
HNDL ~3%. Sesa Goa (NR) and Hindustan Zinc (NR) are other
companies that would be impacted from the above clause.
What is the next step?: After the Cabinet approval, the bill would go to
the Standing Committee of Parliament. The timing from the Standing
Committee to final law is difficult to state and it could be between a few
quarters to one quarter. Media reports (CNBC and ET Now) highlighted
that the Ministry of Mines expects the bill to be tabled in the Parliament
in the upcoming winter session (Nov-Dec 2011).
Longer term it is a step in the right direction: In the media interview,
the cabinet highlighted that the new bill aims to create a better legislative
environment to attract investment in the mining sector. As highlighted in
our report based on the previous draft bill ("Draft Mining Act (MMDR)
suggests sharp increase in taxes for India's mining sector" published on
12-Jul-10), it includes many positives like faster clearance process,
procedural simplification, auctioning of lease, setting up of the National
Mining Tribunal and a central regulatory authority to check illegal
mining.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cabinet approved the MMDR Bill: As per media reports (CNBC,
ET Now), the Cabinet today approved the much awaited New
Mining Bill. The new Mining bill will replace the 1957 Act. While the
Draft Mines & Minerals (Regulation and Development) Bill, 2011 is not
publicly available, as per media reports (CNBC, ET Now) the bill
includes the 2 key clauses- 26% profit sharing for coal miners and
100% royalty equivalent for non-coal miners to be distributed to the
affected parties and spend for local development. It is still not clear
if there are offsets available (CSR spend, social overhead, etc) to this
levy.
Worst case impact on earnings: As highlighted in our note
(“Preliminary Worst Case EPS impact across coverage universe on the
new clauses of the Mining Bill” published on 8th July 2011), in a worst
case scenario the EPS impact is the highest for COAL (~15%
assuming 26% profit sharing on previous year's profits and this
profit sharing is a tax deductible expense), while JSW Steel would be
the least impacted. The EPS impact on other companies are STLT-
~7.5% (large part coming from the zinc subsidiary in India where
royalty rates would double from current 8% of LME); TATA~7%;
HNDL ~3%. Sesa Goa (NR) and Hindustan Zinc (NR) are other
companies that would be impacted from the above clause.
What is the next step?: After the Cabinet approval, the bill would go to
the Standing Committee of Parliament. The timing from the Standing
Committee to final law is difficult to state and it could be between a few
quarters to one quarter. Media reports (CNBC and ET Now) highlighted
that the Ministry of Mines expects the bill to be tabled in the Parliament
in the upcoming winter session (Nov-Dec 2011).
Longer term it is a step in the right direction: In the media interview,
the cabinet highlighted that the new bill aims to create a better legislative
environment to attract investment in the mining sector. As highlighted in
our report based on the previous draft bill ("Draft Mining Act (MMDR)
suggests sharp increase in taxes for India's mining sector" published on
12-Jul-10), it includes many positives like faster clearance process,
procedural simplification, auctioning of lease, setting up of the National
Mining Tribunal and a central regulatory authority to check illegal
mining.
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