Winding up existing leases would be unlawful

Concerned agencies responds to National Council’s resolution

Mining: Nationalisation of mining activities would breach mines and minerals Act and the mines and mineral management regulation, the ministry of economic affairs has informed the National Council.   

In the last session, based on a performance audit, the council expressed concerns on the current policies and practices related to the mining and quarrying sector.

The house had then resolved that all existing mining leases be immediately terminated, if applicable. “This would logically entail the nationalisation of all mineral extraction activities,” stated the last session’s resolution.

Deputy chairperson, Tshering Dorji, was reading the follow-up report to the house yesterday.  The economic affairs ministry had responded that the present Acts, policies and lease agreement do not allow termination of existing mining leases, unless lessee violates the provisions of Act, regulation and the lease agreement.

Further, the mines and mineral management Act, 1995 stipulates reasonable compensation in the event of termination due to some changes in the government policy and without the fault of the lessees.

Thus, the ministry stated that should leases of some non-captive mine be terminated, then a new policy has to be put in place with budgetary provisions for compensation.

The council also suggested the State Mining Corporation be established to promote social and economic equity in the country and that the corporation must be mandated to conduct all primary mining activities and extraction of minerals in the country.

However, the economic affairs ministry responded that the establishment of State Mining Corporation was not to compete with existing private mining companies, but to complement and set standards for the private miners.

The Royal Audit Authority (RAA) had observed that, due to non-declaration of income earned by private transporters, Nu 25.90M between 2010 and 2013 was forgone through exemptions enjoyed by some truck owners, who deployed their trucks for Jigme Industries Private Limited, a subsidiary of Jigme Mining Corporation Limited.

The council suggested the finance ministry to immediately amend the rules on income tax, which exempts trucks and taxis from personal income tax.

This was because it contravenes the Income tax Act, which specifies that income from other sources shall mean income from hire of privately owned vehicles, plant and machinery and from intellectual property rights.

The finance ministry’s response stated that, when income tax rules was drafted, income of trucks and taxis was deliberately excluded from personal income tax on the ground that these commercial vehicles pay motor vehicle tax to Road Safety and Transport Authority, which is not paid by other privately owned vehicles.

While it was possible for the finance ministry to amend the rules, it stated that administratively, it would be difficult for the revenue and customs department to monitor such highly mobile establishments. However, the ministry was reviewing the provision.

On the house’s suggestion to conduct necessary diagnostic studies in the geology and mines department, the ministry responded that the department was currently entrusted with overall policy and regulatory aspects of mining sector.

The ministry however added that, the Royal Civil Service Commission’s recent organisational development exercise recommended the establishment of a mines and mineral regulatory authority.

Meanwhile, the house directed the special committee, which was constituted to follow up on the resolutions regarding the performance audit report on tax of mining and quarrying sector, to work on the recommendations for a final deliberation, next week.

By Tshering Dorji

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