Mines ministry may drop plan to disallow lease mergers

By: | Published: December 3, 2015 3:23 AM

Mining industry is of the view that bunching of leases is required to achieve economies of scale

The Union mines ministry may drop a plan to disallow the amalgamation of mineral leases, paying heed to the industry’s view that bunching of leases is required to achieve economies of scale. Commenting on the draft Mineral Concession Rules published by the ministry, SBI Capital Markets too has favoured the continuance of the provision for combining leases.

The Mineral Concession Rules, 1960, which is operational now, has a provision for the amalgamation of two or more adjoining leases, provided these are held by the same lessee with the condition that the period of amalgamated leases shall be co-terminus with the lease whose period will expire first. State governments also have the power to order the amalgamation in the interest of mineral development.

However, the draft MCR, 2015, unveiled by the ministry pursuant to the amended MMDR Act covering metallic and non-metallic minerals such as bauxite, iron ore, gold, copper and manganese ore, has excluded the clause without assigning any reason. Mines secretary Balvinder Kumar told FE, “The MCR is in a draft stage. We are talking to various stakeholders. We are yet to finalise the rules. However, we have not rejected the idea (of retaining the amalgamation clause) yet”.

Sources in the ministry said since the transfer of mines allocated through the earlier dispensation route is prohibited under the new Mines and Minerals (Development and Regulation) (Amendment) Act, there is no point in allowing the amalgamation of mines. But industry sources said amalgamation may be a practical need on many occasions.

They argued that banning the combination of leases doesn’t make sense when the leases obtained via the auction route are transferable.

“The rule for amalgamation should be kept as it is, or there should be some save clause as per the MCR, 1960. There are many mining leases adjacent to each other prior to the enactment of MMDR, 2015. For better exploitation of mineral wealth and sustained development, the facility of amalgamation should be allowed to the earlier leases,” SBI Caps said in a recent presentation to the mines ministry.

“The practice of amalgamation of rules should continue for the scientific point of view. This will also be helpful to make areas compact and contiguous wherever isolated land parcels are not made available for ML,” it added.

Industry sources said not only the new or old leases held by one lessee, amalgamation of mines should be allowed even in case these are owned by two different entities.

“Higher the scale, the better for efficient mining operation. It is always better to have a bigger mine than three smaller leases. It also reduces the production cost and helps one company to compete globally.,” said an industry expert.

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.

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