IF Australia can do it, can India be far behind?

Always on the look-out for fresh avenues for revenue, the Mines ministry plans to charge a windfall tax on non fuel minerals like iron ore to claim a share of the high profits earned by the mining sector.

According to the Mines Minister, B.K. Handique, the proposal is to levy a windfall tax on domestic sales as well as exports of minerals when their prices are substantially higher than the cost of production.

This proposal is similar to Australia's proposal to introduce a 40 per cent mining profits tax from July 2012. However, unlike Australia, which will have to face extreme resistance from resource companies and opposition politicians,in India only the Finance Ministry needs to clear the proposal. Also, unlike Australia, India has a mostly captive production model where mining leases are given to producers with their own plants to make finished products.

While Australian mining giants like BHP Billiton and Rio Tinto fear that the tax will impact future investment in this sector, India has few foreign investors in the mining sector. However, global steel makers such as Arcelor Mittal and South Korea's Posco have mega steel projects in the pipeline.

India has huge iron ore reserves of at least 25 billion tonnes and is the largest exporter of iron ore after Brazil and Australia.India produced 215 million tons of iron ore and exported 106 tons out of the same in the fiscal year ended March 31, 2009. It is also a leading producer of bauxite, with the mining and quarrying sector contributing 2 per cent to the country's gross domestic product.