- 19 Dec 2024
- ICICI Securities
KARNATAKA GOVERNMENT LIKELY TO IMPOSE ADDITIONAL DUTY ON IRON ORE MINING
News: As per media sources, the Karnataka government is contemplating raising the duty on iron ore mining. Additionally, the bill proposes a levy ranging from ₹20 to ₹100 per ton for various minerals. A draft of the proposed hike in iron ore is being circulated and a formal discussion is expected from the state government.
Views: This proposed tax increase is a concerning development for mining companies, particularly NMDC, which derives ~30% of its overall production from Karnataka’s iron ore mines. Moreover, as per the sources, the new tax rate, pegged at 1.5x the existing royalty rates, would result in a ~22.5% rise in costs for NMDC. Consequently, this would increase the cost of production of steel, negatively affecting the operating performance of domestic steel players. JSW Steel, one of the major clients of NMDC that sources significant quantities of iron ore from the company, could be notably affected from this development. Additionally, other mining companies operating in Karnataka, such as Vedanta and Sandur Manganese, which produces 5.6 MTPA and 3.8 MTPA, respectively, will also be impacted. Thus, this above announcement has already triggered a negative response in the given stocks during yesterday’s trading session. We will closely monitor further developments regarding this matter.
Impact: Neutral