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Rajya Sabha approves amendment to the mining law

03 May 2016 Evaluate

The Rajya Sabha has approved an amendment to the mining law to enable mergers and acquisitions (M&A) of steel and cement companies, reeling in the aftermath of the collapse in global commodity prices. Lots of public sector banks (PSBs) including State Bank of India (SBI), were trying to forge tie-ups between distressed cement, steel and power companies with those that are in better shape, but were unable to do so, it was SBI who lobbied hard to get the amendments in the bill, which will enable banks to sell assets to relieve stress.

The changes are mainly aimed at helping companies sell limestone mining licences along with their cement plants. The government expects the transfer of non-auctioned mines to happen smoothly. Mines minister Narendra Singh Tomar said that the amendment was in the larger interest of workers and the provision was not intended to benefit any industrial house.

In 2015, the government brought the Mines and Minerals (Development and Regulation) Amendment Bill, replacing a 1957 legislation which stipulated that mining licences could only be auctioned. This amended law allowed transfer of mines allotted through auctions but was silent on captive mining licences handed out in the past on the basis of recommendations of a screening committee. That discouraged deals among companies and Major deals among cement companies like UltraTech, Reliance Cements and Lafarge were stuck because the Mines and Minerals (Development and Regulation) Amendment Act, 2015 permitted transfer of mining leases only for auctioned mines.

So in January this year, the government proposed the amendment to spur merger and acquisitions in the mining sector and 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. Since Lok Sabha has already approved the proposed law, The Mines and Minerals (Development and Regulation) (Amendment) Bill, 2016, is just one step away from becoming a law- it now?only requires the President’s signature. Once the Bill is signed into law, there will be no bar on the transfer of mining leases.

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