Metal Stocks Plunge Following Supreme Court Verdict on Mining Royalties
Shares of Indian metal firms dropped significantly after the Supreme Court ruling on mining royalties. The judgment mandates that states can claim dues from April 2005. This has major financial implications for the mining sector, potentially costing up to Rs 2 lakh crore.
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Shares of metal firms took a beating on Wednesday, with NMDC slumping 6 per cent, following the recent Supreme Court verdict on the mining royalty case.
NMDC's stocks decreased by 6.08 per cent, Hindustan Copper tumbled 4.25 per cent, MOIL dropped 3.47 per cent, and Coal India fell 3.18 per cent on the BSE. National Aluminium Company declined 2.71 per cent, SAIL went lower by 2.26 per cent, Gujarat Mineral Development Corporation by 1.39 per cent, Tata Steel by 1.81 per cent, and Vedanta by 0.63 per cent. The BSE metal index also dropped 1.51 per cent to 30,312.05.
In a significant win for mineral-rich states, the Supreme Court allowed them to seek dues for royalties and taxes from April 1, 2005, over 12 years. This ruling, announced by a nine-judge Constitution bench led by Chief Justice DY Chandrachud, rejected the argument for prospective effect from July 25.
According to Miners' body FIMI, India's mining sector already faces the highest global taxation, and this ruling is bad news for the industry. Vikram Kasat, Head-Advisory at PL Capital - Prabhudas Lilladher, described the ruling as a negative development for the metal sector. The Centre opposed states' demands for royalties from mines and minerals since 1989, arguing it could cost PSUs up to Rs 70,000 crore.
Industry sources estimate the financial impact of the ruling to be between Rs 1.5 lakh crore and Rs 2 lakh crore. NMDC's Chairman and Managing Director Amitava Mukherjee stated that the company is assessing both short-term and long-term implications. In a filing to the BSE, Coal India noted that they are evaluating the financial impact of the Supreme Court order, with details to follow.
(With inputs from agencies.)
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