Rotem Amfert phosphates concession seen being extended

Phosphates field west of Arad  credit: Rafi Kutz

A NIS 23.6 million payment on account of underpaid royalties paves the way for the Knesset Finance Committee to grant a further three-year concession.

Sources inform "Globes" that Rotem Amfert, of the ICL group (formerly Israel Chemicals), has paid the state NIS 23.6 million on account of royalty differences. The payment paves the way for the approval that the Knesset finance Committee is due to award the company for continuing to mine phosphates on the Rotem Plain in the Negev for a further three years. The extension of the concession was made without a tender.

The company, which directly employs 1,600 people, has been mining phosphates for decades, but in the past few months there has been a question mark over its continued activity, as its concession expires at the end of this year.

In the past, the company said that the amount of minerals left in the area was small, and that mining could therefore not continue beyond the three additional years for which it requested an extension to the concession. This was also the main reason that former minister of energy Yuval Steinitz was inclined to recommend extending the concession for this period without a tender. The process, which was approved by the Government Companies Authority, also requires approval by the Knesset Finance Committee, but the break-up of the previous government halted the process, which was supposed to have been almost automatic.

Last August, Minister of National Infrastructures, Energy and Water Resources Karine Elharrar was informed that the Accountant General's department in the Ministry of Finance had begun a non-routine check on royalties paid by the company. The check led to the minister suspending submission of the recommendation to extend the concession. The upshot is no application to the Knesset Finance Committee for an extension, or, in other words, ending the company's activity.

Because a large employer was involved, the Histadrut (General Federation of Labor in Israel) approached the minister and asked for the process to be expedited. "Within less than four months, without an extension for a further three years, as planned and approved by your predecessor, the plant will be closed and thousands of workers and their families will be left without a livelihood," Histadrut chairperson Arnon Bar-David wrote. "The Histadrut, and I at the head of it, can no longer refrain from intervening for the protection and welfare of thousands of workers." "Globes'" enquiries have found that the minister met Bar-David on the matter recently.

Despite the hundreds of millions of shekels in revenue derived by ICL from phosphates, the royalties collected by the state from Rotem Amfert on phosphates amounted to NIS 8.6 million in 2020 and NIS 10.3 million in 2019. A source familiar with the details said that the reason for this was that most of the revenue in this sector came from the company's activity overseas.

Over the years the company benefitted from a somewhat low royalty rate, which led to it being raised from of 2% per mined tonne to 5% a few years ago. These numbers lay behind the Accountant General's decision to check past payments to the state by the company.

Once the Accountant General's decision became known to the Ministry of National Infrastructures, Energy and Water Resources, it was decided that it would take the enquiry upon itself, in coordination with the Ministry of Finance. The result was a determination that the company should pay NIS 23.6 million on account of royalties owed for the period 2012-2019. No date has yet been set to convene the Knesset Finance Committee to discuss extending the concession. A Ministry of National Infrastructures, Energy and Water Resources source said that the ministry was carrying out "a number of checks". From "Globes'" enquiries, however, it appears that the settlement reached by the sides paves the way to a recommendation by the minister and to an extension of the concession in the near future.

The Ministry of National Infrastructures, Energy and Water Resources said in response, "The ministry's royalties department recently completed a professional, in-depth audit of royalties paid by Rotem Amfert and demanded an additional payment of NIS 23.6 million, which is 47% more than the amount according to the company's position. The company has already made the additional royalty payment as demanded by the ministry. It arises from collection differences following the Sheshinski 2 law. It should also be made clear that a few years ago the royalty rate on phosphates was raised from 2% to 5%, after the Sheshinski 2 committee and subsequent legislation.

Published by Globes, Israel business news - en.globes.co.il - on December 6, 2021.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2021.

Phosphates field west of Arad  credit: Rafi Kutz
Phosphates field west of Arad credit: Rafi Kutz
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