According to clause 5 of article 43 of Iran’s sixth five-year development plan which states mineral activities and exploiting of mines that can damage regional residents and their agriculture, mining companies are mandated to compensate one percent of their total revenues to the treasury. This is in addition to pollution tax in order to compensate the environmental damages. According to this Act, government plans to oblige companies to pay this imposed tax by enacting in new year budget bill, which was approved by parliament last February. Coal mines are in economic difficulties and they needed sovereignty’s attentions and after a meeting between the Iranian Coal Association and Economic Commission of Parliament, coal companies are exempted from paying one percent of their sales.
There are some problems in this industry in Iran as follow:
- There was no subsidy on products in Iran which was routine in some other countries. The new decision of the government in Iran is allocation of subsidy in this industry and could be seen as a reward for them to increase their operational profit.
- There was only one exclusive customer; Esfahan Steel Company. Nowadays this problem has been expected to be solved in the future because of new demand of Middle East Mines and Minerals Company (MIDHCO) and also exporting of coal production is another way to make these companies more profitable. Recently, Iran has delivered the first shipment of coal production to China.
- Lack of appropriate investment in this industry has led to some problems in exploiting. Recently, the governmen allocates some parts of resources of the National Development Fund to renovate the equipment in this industry especially has been focused on safety in mines.
Iran holds about 0.13% of all world coal reserves. The proved reserves are around 1.23 billion tons and probable reserves are estimated to be between 11 and 14 billion tons. Iran covers around 25 to 30 percent of its domestic consumption by importing mainly from Australia, China, Russia, Germany and Ukraine and major export is thermal coal which export to Turkey. The following chart depicts the coal import and export status:
There are three major coal companies in Iran; Tabas Co., Shahrood N.E Co. and Negin Tabas L. Co.
The chart below illustrates the negative effect of former policy on coal companies assuming forecasted profit in solar year 1396. Among these companies, Shahrood Co. benefits more because if they had to pay one percent of their total sales to treasury, operational profit of Shahrood Co. would decrease by around 6 percent. That is while, reduction in operational profit for Tabas Co. and Negin Tabas Co. is 3.5 and 4.4 percent respectively.
To put it in a nutshell, it seems the sun will soon rise again in this industry not only because of demand increment, but also the government’s fund especially in decrement of the companies’ cost. Iran’s plan to reach 55 million tons steel production in 2025 can make more extensive domestic demand for coal and concurrently, efforts to explore new overseas markets can boost coal industry in Iran. As a result, government eases rules for this industry that exemption of paying one percent of their revenues is one of the most influential decisions.