In a move that could remove a hurdle to corporate mergers and takeovers in the mining sector, the government will allow seamless transfer of existing mining leases among companies in the same way as the mineral concessions to be given under the new auction route can be traded among firms.
The mining ministry’ proposal, which requires an amendment to the recently modified Mines and Minerals (Development and Regulation) (Amendment) Act, 2015, to take effect, would help the recently announced sale of Lafarge India’s two cement units to Birla Corporation for R5,000 crore and UltraTech’s R5,400-crore takeover of the Jaypee Group’s integrated cement plant in Madhya Pradesh to sail through. While in both these cases the bar on transfer of limestone mines posed a problem, several other firms with interests in the mining and natural resources sectors including Tata Steel, the Vedanta Group and the public-sector SAIL would find the mining ministry’s proposal helpful in carrying out their expansion/reorganisation plans, industry analysts said.
The MMDR Act regulates 10 minerals including iron ore, bauxite, manganese ore and limestone. Auctioning of mining leases is yet to start.
Section 12 A (C) of the MMDR (Amendment) Act, 2015, which came into effect in March following a January ordinance replacing a 57-year-old Act, allows transfers of the auctioned mines, but disallows transfer of any lease allocated through the earlier “dispensation route”. The Lafarge-Birla and UltraTech-Jaypee deals are stuck as the current rules allow plants to change hands, but not the captive mines attached to them. Mining leases granted prior to the auction regime cannot be reallocated even within a corporate group let alone be transferred to other corporates.
Sources said that the need for amending the current rules has been appreciated by the Prime Minister’s Office. However, they said an amendment to the Act is unlikely in the winter session of Parliament as the decision-making process might take some time. A senior mines ministry official, however, admitted that “problems are indeed there (with current regime)”.
Industry sources said since more than half of the major mineral mines in the country are below 10 hectares, the legislative framework must not only facilitate but also incentivise amalgamation and transfers. Consolidation (of mines) based on geo-scientific principles is necessary, they said.
Sources from the mines ministry said finding a solution to the issues relating to dumping of waste outside the lease area, particularly in Goa, is also high on the amendment agenda. While lifting the mining ban for the coastal state, the Supreme Court had in April 2014 also directed that all mining and mining-related operations must take place only within the notified boundaries of the mining lease. Dumping outside was the usual practice in the state earlier. Though there is strong lobbying for continuation of the earlier practice, the Centre is not inclined to entertain the plea of the Goa government and the state miners in this regard, the sources said. Goa miners want the government to grant them permission to dump waste outside the leases by amending the MMDR (Amendment) Act as their mines are “comparatively smaller in size”. “Our mines are small, if we store the produced ore within the lease area, the mining activity will be squeezed, impacting production. If it is not allowed, mining activity will come to a standstill in Goa. The Act needs to be changed,” a Vedanta official said. Vedanta is the biggest iron ore miner in Goa.
Also, Section 8A (7) of the new MMDR Act, 2015, confers the right of first refusal to the lessee under the old mining lease to be exercised at the time of auctioning held for such lease after the expiry of the lease period. However it is not clear at what stage of the auction such right shall be exercisable as it does not shed any guidance on the nature, stage and limitations on the exercise of such right. The miners also want clarity on this and introduce suitable amendments to avoid potential litigation.