Saturday, March 24, 2012
India Hit by Australian mining tax on Steel and Coal.
Indian steel companies may have to shell out a few dollars more to import metallurgical coal from Australian mines, effective July 1. The Australian government passed a Bill that will impose a 30 per cent tax on the profits on local iron ore and coal miners, but will allow certain deductions.
Most of the large steel companies in India such as SAIL and JSW Steel depend on imported coal. Others such as Tata Steel with substantial European operations also depend entirely on external sources for iron ore. Australian miners are likely to pass on the tax to customers, primarily from China and India.
While Indian steel companies will be impacted, the new tax may actually benefit Indian miners such as NMDC and Sesa Goa as a result of higher iron ore prices.
The stocks of steel makers such as Tata Steel and JSW Steel as well that of power utilities such as CESC and Adani Power took a hit. But power companies may not be impacted much in the medium term. While a handful of companies such as Lanco Infratech, Adani Enterprises, GVK Power and CESC have stakes in Australian coal mines, supplies from those mines will commence only after 2-3 years. This may provide time for players to build the costs into new purchase agreements with electricity boards.
That said, both Indonesia and Australia, two of the key coal resource regions for India, have turned expensive for power companies.