SAIL – A really long term opportunity

Hello everyone, I wish to share an update on latest supreme court judgement w.r.t. mining companies.

Couple of weeks back there was a decision by Supreme court that State governments can levy royalty (it is not a tax) on Mining of minerals. The question was, will it be Retrospective or Prospective?

Yesterday there was a big announcement from the Supreme court with respect to Mining Royalty Case:

1. The Supreme court has said that States can collect previous dues on royalty and tax on mineral bearing land w.e.f. Apr 01, 2005.
2. The amount can be paid in staggered manner in next 12 years starting from Apr 01, 2026 at the rates that were decided then (FY2005), but interest and penalties on past due will not be levied.
3. This decision will significantly impact industries like mining (NMDC, Vedanta), metal industries (Tata steel, JSW steel, SAIL, NALCO), cement industries (India cements, ramco cements for limestone mining).
4. Total estimated overdue amount is ~2 lakh crore of which ~60,000 crore is from PSUs.
5. Tata steel in Q1 has stated that they have created contingent liabilities of ~17,300 crore towards Odisha government for retrospective effect of these claims while Hindalco stated that they donot have any pending claims. SAIL also mentioned in the Q1FY25 concall that there will not be much impact on them (haven’t shared any estimated amount in case of retrospective effect).
6. Steel industry is already facing challenges due to cheaper imports from China resulting in lower realisations (sales amount/tonne) industry-wide.
7. This decision may also impact capex plans getting delayed from some companies as there would be additional outgo of funds due to the same.