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Coming under the pressure from industry, where various mergers and acquisitions are nstuck, the government has finally decided to amend the mining law in order to permit the transfer of non-auctioned mines, which were granted for captive uses.
The problem began when the amendment in the Mines and Minerals (Development and Regulation) Act, 1957 – which was passed by the Parliament in March last year – said the transfer of mining leases would be permitted only in cases of auctioned mines. However, no non-coal mining leases have been awarded through auction till date.
As a result, major deals amounting to thousands of crore rupees (such as of Lafarge and Jaypee) got stuck because captive mining rights, which were an essential part of the deal, could not be transferred to the buyer companies. The government has now issued the draft bill – open to comments till January 26 - announcing the transfer provision.
“The transfer provisions will also allow mergers and acquisitions of companies and facilitate ease of doing business for companies to improve profitability and decrease costs of the companies dependent on supply of mineral ore from captive leases,” said the mines ministry’s press statement on Monday, at a time when country’s first non-coal mines auction is taking place in various states.
The government expects the transfer of captive mining leases to facilitate banks and financial institutions in liquidating stressed assets where a company or its captive mining lease is mortgaged.
Under Section 12(A) of the law, 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 issue a 90-day notice to the state government for permission. The transfer becomes effective only after that. The state government can disapprove of the transfer.
“The transfer of captive leases would be subject to the consideration of enforcing Performance Security, Mine Development and Production Agreement (MDPA), and realisation of an appropriate amount, if any, if found feasible at the time of framing terms and conditions,” the government said on Monday.
