MMDR Act of 2015 to be amended

  • The government, during the Budget session of the Parliament, plans to amend The mining law which is holding up mergers and acquisitions worth thousands of crore in the distressed commodities and mining sector.

  • Consolidation, in stressed sectors such as metals and cement, is critical as companies seek to lower their debt levels by hiving off assets.
  • The deals are stuck as the Mines and Minerals (Development and Regulation) or MMDR Act of 2015, which aims to ensure transparent auctions of minerals, doesn’t allow transfer of captive mines allotted to end-user plants in the past.
  • For instance Birla Corp’s Rs. 5,000 purchase of two Lafarge India cement units was announced this year.So, Birla Corp. can take over Lafarge’s cement plant, but won’t get access to the captive limestone mines linked to the plant, making the transaction unviable.
  • For allowing transfer of captive mines, there is no other way to proceed without an amendment. The govt is about to move a cabinet note for inter-ministerial consultations, proposing a change so that captive mines can be transferred
  • The transfer of mineral concessions shall be allowed only for concessions which are granted through auctions,” according to the relevant sub-section of the MMDR Act of 2015, which came into force on January 12.
  • Before this change, transfer of mining leases was allowed under the mineral concession rules of 1960 after getting an approval from the state government.
  • The clause has turned into a deal-breaker as a cement or steel plant with captive limestone or iron ore mines loses its utility without the assured mineral resources.
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