Draft rules: Mining M&As to get a fillip with ownership transfer nod

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June 23, 2021 3:15 AM

Usually, it takes three to four years for a winning bidder to acquire the ownership of a mine after securing all clearances, including environment and forest nods; the new rules would mean that there won’t be any bar on transferring the ownership once it is vested.

The only rider is that such transfer will not result in change of the status of captive mines to merchant mines or vice-versa,” said FIMI’s joint secretary general BK Bhatia.The only rider is that such transfer will not result in change of the status of captive mines to merchant mines or vice-versa,” said FIMI’s joint secretary general BK Bhatia.

The mines ministry has proposed a host of amendments to the mineral concession rules (MCRs) for minerals other than atomic and hydro carbon energy under which ownership transfer for all kinds of mining leases obtained either via auction or non-auction routes would be allowed. This is expected to encourage mergers and acquisitions in the sector.

Usually, it takes three to four years for a winning bidder to acquire the ownership of a mine after securing all clearances, including environment and forest nods; the new rules would mean that there won’t be any bar on transferring the ownership once it is vested.

The non-transferability of mining leases have been dampener for investors. “In line with the MMDR Amendment Act, 2021, the draft Minerals (Other than atomic and hydro carbon energy mineral) concession (Fourth Amendment) Rules, 2021 allows transfer of mining lease in all cases whether auctioned/non-auctioned, captive/non-captive mines. The only rider is that such transfer will not result in change of the status of captive mines to merchant mines or vice-versa,” said FIMI’s joint secretary general BK Bhatia.

The Minerals (other than atomic and hydro carbon energy mineral) concession, 2016, which is now proposed to be amended, allowed transfer of mines granted through the auction route and the mines granted other than under auction route, but only those meant for captive purposes. “The transfer proposal is set to help merger and acquisition in the mining space for which FIMI has been pursuing for a long time,” Bhatia said.

A proposal is also there to permit part surrender of the mining lease without any restriction. As per the extant rule, if some lessee wants to surrender the lease, then it has to be surrendered the entire area of the mining lease. The only exception for part-surrender of the lease is permissible only in case lessee has been unable to obtain forest clearance for such area. This proposal will help in smooth and effective functioning of a mine and ensure steady production.
Also, the government has proposed to halve the simple interest rate, currently payable at 24% per annum, on delayed payment for various levies and fees including on rent, royalty and others. “The reduction in the penal interest rate is a very welcome step. FIMI has been pursuing for this,” Bhatia said.

The changes in the draft MCR, 2021, have been proposed to implement the amendments made in March this year to the Mines and Minerals (Development and Regulation) Amendment Act, 2021. The objective of the amendment was to increase employment and investment in the mining sector. It was also aimed at enhancing the pace of exploration and auction of mineral resources.

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