Tata Steel To JSW Steel: Supreme Court Order On Mining Royalty Spell Relief For These Companies
A potential change in the method of calculation of mining royalties would reduce liabilities of companies like Tata Steel, JSW Steel, and Steel Authority of India.
In its latest order, the Supreme Court has asked the Centre to reconsider the current computation method of mining royalties.
This offers some hope for companies like Tata Steel Ltd., JSW Steel Ltd., Steel Authority of India Ltd. and more, as mining royalty payments had increased the financial burden of the companies, thereby impacting profitability by 2-3%, as per Nuvama Research.
Latest Mining Royalty Ruling
On Nov. 8, the Supreme Court of India gave the government two months to carry out a public consultation process, and reconsider how mining royalties are calculated. The top court highlighted concerns on the 'compounding' or 'cascading' effect of the current mining regulations. It stated that the regulations violated Article 14 of the Constitution that guaranteed the right to equality.
The Supreme Court has stated that the current computation method results in payment of royalty on royalty and causes excessive financial burden on mining leaseholders.
This comes after the August 2024 judgment that allowed state governments to tax mining royalties paid by companies on a retrospective basis.
Companies Get A Breather
Out of all the companies that were expected to be impacted by the mining royalties, the company that would benefit the most would be Tata Steel, which set aside a liability of Rs 17,346 crore after the earlier ruling was passed.
Companies like SAIL and JSW Steel could also see some relief, with an expected liability impact of Rs 2000-Rs 4,000 crore, as per Nuvama.
While the liability for Coal India is expected to be high, Nuvama stated companies like NMDC and Coal India would have been able to pass on most of their dues due to their pass-through clauses.
