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Govt to amend law to push mining M&As

12 Jan 2016 Evaluate

In a bid to help companies pare debt and enable banks to recover some of the funds that are locked up, the government has proposed amendments to the country's mining law, within a few months of the amended mining law being operational. It will allow transfer of captive mines allotted in the past to new owners in case of a merger or acquisition deal.

This move will benefit metal companies, which have been hit by an onslaught of cheap imports from China where there is surplus capacity due to an economic slowdown. It will also help in checking the stressed and non-performing assets of banks by allowing them to liquidate assets where a firm or its captive mining lease is mortgaged.

While releasing the draft amendments, the Mines Ministry has said that 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. The ministry said that the government would allow the transfer at the time of M&A but specified certain conditions. The transfer of captive leases would be subject to the consideration of enforcing performance security, Mine Development and Production Agreement (MDPA), and realization of an appropriate amount only if found feasible at the time of framing terms and conditions.

In order to amend the mining law, the government started the process of consultations with stakeholder. It has invited views from the public, states and industry on the need to amend the MMDR Act and then a cabinet note proposing amendment would be finalised. Comments and suggestions could be submitted until January 26.

The government released draft amendments to the Mines and Minerals (Development and Regulation) Act, 1957 as changes last year blocked transfer of leases for captive mines which were allotted before auctions became the norm.


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