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Mining: CIL for profit sharing, Tatas change stance

September 20, 2010 18:26 IST

Coal behemoth CIL on Monday came out in support of the government proposal that miners share 26 per cent of profits with local people affected by their projects, while Tata Steel toned down its stance on the issue.

Contrary to its earlier stand of supporting the profit sharing clause in the proposed mining law, Tata Steel said it would rather suggest that the operating costs be the basis for contribution to local development.

Last week, Tata Steel Vice Chairman B Muthuraman had supported the government move saying, "It is a move in the right direction, if implemented in the right way."

However, shifting stance, the global steel player said it has always believed in sharing prosperity with people, but that should be part of the cost of operations and not profits.

"The proposal to include them in the earnings of the corporate entities operating mines is laudable, but the company also believes that this social cost must be a part of the cost of operations and not derived as a share of the profit," Vice President, Raw Materials, Tata Steel Partha Sengupta said.

Profit can be impacted by several factors, he said, adding, "Whereas when it is is treated as a part of the operating costs, it will be consistent, transparent and sustainable through the life of the mine."

Sengupta suggested that the quantum can be decided on similar lines of the royalty. Tata Steel is among the top ten global steel companies with an annual crude steel capacity of over 28 million tonnes per annum. State-owned Coal India Ltd, on the other hand, supported the proposal but said it will impact coal prices.

"Any kind of basic mining is associated with grassroots, and CIL welcomes this proposal which will provide distributive justice to the project affected people," Coal India Ltd Chairman Partha S Bhattacharyya told PTI.

CIL, which is scheduled to come out with possibly the largest public offer in India next month, added however that such an outgo would have an impact on price of coal.

Bhattacharyya said the company will have to resort to other measures like increasing coal prices to sustain profitability and production.

He, however, did not indicate the quantum of possible increase in prices saying it was too early as the proposal is still to be finalised.

Last week a GoM, constituted to discuss the draft mining bill, favoured 26 per cent profit sharing proposal, which has been opposed by the Steel Authority of India Ltd, saying that captive mines be kept out of the purview.

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