Fresh mining levies by States, enabled by a recent Supreme Court verdict, could trigger a hike in electricity tariffs for consumers, thanks to a 0.6% to 1.5% surge in costs for coal-fired thermal power producers, while margins of domestic steel and aluminium players could also face a significant dent, rating agency ICRA said. While most States are yet to decide on the new mining cess rates, a 2004 law in mineral-rich Odisha permits a cess of around 15% on iron ore and coal mining. Enforced fully, this could result in a nearly 11% rise in the landed costs of iron ore, directly impacting steel firms’ competitiveness, ICRA estimated in a note on Monday. The Jharkhand government, has imposed a modest increase of ₹100 per tonne on iron ore and coal, which will have a minimal impact of 30 to 40 basis points (bps) on steel industries’ operating margins. One basis point equals 0.01 percentage point. If other States adopt similar measures, the overall impact would remain modest, ICRA reckoned. However, the possibility of states applying the cess retrospectively introduces additional uncertainty, potentially burdening companies with past tax liabilities although the apex court has allowed for staggered payments over 12 years starting from April 1, 2026, with no interest and penalties to be levied for past dues. Primary steel producers’ margins could shrink by about 60-180 bps, with secondary producers expected to see margin declines in the range of 80 to 250 basis points, based on various scenarios that cess rates could potentially vary between 5% and 15%. Primary aluminium producers will also have to bear the brunt of increased costs of power, that could potentially rise by ₹1,200-1,300 per tonne (or $15-$16 per tonne), assuming a 15% cess. This represents around 0.6% of current aluminium prices, ICRA noted.
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