Will New Mining Tax in Australia Impact Indian companies?

The Australian government has passed a new 30 per cent tax proposal on big mining companies in the parliament on Monday. With major imports of important minerals and some recent acquisition of mines by Indian corporate most of the investors would be interested to know whether this tax on the mining will impact Indian companies or not?

The tax on mining will not impact the Indian companies who have acquired land for mining or are in the process of making an investment. As the tax will be levied only to those major companies who are making higher profits from the mining. A company will only have to pay the tax when its annual profits reach $75 million, a measure designed so as not to burden small business. Whereas Indian companies have just entered the region and are operating at very low levels.

For instance, Adani Power, that recently acquired a coal mine in Queensland, will not be impacted by this move. In a statement given to the media the company said that the tax levied on the mining operation in Australia will not impact its Coal business for several years after the start of the production. As per the mining Law in Australia a mining company can set off its full capital expenditures from the profits made in the year it is made and any unabsorbed excess is carry forward till expenditures are fully capitalized. Therefore the impact on Tax might come in the long term.

Further there are companies who are at presently in the investment stage. Some of the major companies that have a presence in Australia are GVK Power, Lanco Infratech, NMDC, Jindal Steel, etc. A recent move by the finance ministry to remove the 5 per cent duty on coal had relieved some of the pressure from the power companies.

However the increase in tax will impact major international mining companies like BHP Billiton, Rio Tinto and Xtrata who have major mining operations in Australia. China and India are the major buyers of Australian minerals. In India, most of the steel companies import nearly 60 per cent of the coking coal requirement from Australia and Indonesia.  

Therefore the move by the Australian government may impact steel companies in India if the mining companies revised the prices upwards. Companies like Tata Steel, SAIL and JSW steel imports a large portion of coking coal requirement from Australia.