Firms may sell mines under proposed changes to mining law

Under current laws, a company cannot sell mines but only transfer leases when it is acquired by another firm

The central government, after allowing commercial mining in the coal sector, is now planning to permit companies to sell mines of all minerals, except atomic ones, by providing transferability under the mining law. Under the law in force at present, a company cannot sell mines it holds to other companies, though leases are transferred whenever a mining company is taken over.

The government plans to add in the Mines and Mineral Development and Regulation (MMDR) Act a chapter allowing such transferability for all but atomic minerals, after securing permission from the state government concerned. "This will help develop a transparent market for mines in the country and promote investment in the sector," said an official.
 

At the time of transfer, the seller will be required to pay a transfer fee to the state government. The state will give the necessary approval only after ascertaining that the buying company meets all conditions and liabilities enforceable on the original licensee. At present, ownerships of mines move along with companies. The previous National Democratic Alliance government, for instance, had sold its stake in Balco and Hindustan Zinc to Vedanta Resources, along with the mining leases of these companies.

Sale of a mine could take place in the form of transfer of a mining lease, as well as a prospecting-licence-cum-mining lease granted only through auction. The Union mines ministry wants to table a new Bill in Parliament to amend the MMDR Act. Under the proposed section 12(A), a holder can transfer his mining or prospecting-licence-cum-mining lease to any person eligible to hold such a lease. The seller is required to give a 90-day notice to the state government for permission. The transfer becomes effective only after that. The state government could even disapprove the transfer during this period.

Besides transferability, the government also plans to make changes to the way mines are allocated. The United Progressive Alliance (UPA) government had planned to overhaul the MMDR Act and make the bidding process mandatory for allocation of mining rights. But that Bill lapsed as the Congress-led alliance was voted out of power.

In a major departure from that draft, the present government has given the states the flexibility to levy a charge on minor minerals for sharing of benefits with local people. Under the benefit-sharing clause in the earlier draft, the holder of a mining lease was required to pay 26 per cent of its profit from mining-related operations (for minor minerals) in the previous year, or a sum equivalent to the royalty paid during the previous year, whichever was more, to the district mineral foundation. This money was to be used for the benefit of the local people.

For bulk and surface minerals, iron ore, bauxite, manganese and limestone, to be notified by the central government, the state government can give mining leases directly instead of first issuing prospecting licences. For the deep-seeded minerals, the prospecting and mining licences will be clubbed.

According to Goutam Chakraborty, an analyst at Emkay Global, the government has made the Bill more scientific and "attempted to remove various anomalies".

By fixing timelines and giving more revisionary powers to the Union government, the Bill will give the Centre a greater say in allocation of leases. "The central government is likely to have more control and powers to make the process more transparent and fast, and to intervene if the entrusted authority fails to adhere to the pre-decided timeline. The draft is a step in the right direction and positive for the industry," said Chakraborty.

BACK ON TABLE

• Work in progress: Changes to the mining law have been in the works for over a decade
   
• A hiccup: The Bill placed in the Lok Sabha by UPA lapsed as the Congress-led alliance was voted out of power
   
• Resumption: The NDA govt has unveiled a new draft amendment for public discussion
   
• Sale of leases: Bidding is planned to be introduced for the second and third stage of leases
   
• Selective auctioning: Reconnaissance permits given out for initial exploration not to be auctioned; prospecting and mining leases to be auctioned