NEW DELHI | Jan 12, 2016: The government has proposed amendments to the country's mining law to allow transfer of lease for captive mines during mergers and acquisitions in a move aimed at helping companies pare debt and also enable banks to recover some of the funds that are locked up.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.
As a result, companies such as Jaypee Associates, which is desperately seeking to sell some of its assets to reduce loans that add up to over Rs 40,000 crore, will be able to complete deals. "It will be particularly beneficial to the steel sector as several transactions have been held up," said a banker. The move will also benefit other metal companies, which have been hit by an onslaught of cheap imports from China where there is surplus capacity due to an economic slowdown.
"The transfer of captive mining leases, granted otherwise than through auction, would facilitate banks and financial institutions to liquidate stressed assets where a company or its captive mining lease is mortgaged. The transfer provisions will also allow mergers and acquisitions of companies and facilitate ease of doing busi ness for companies to im prove profitability and de crease costs of the companies dependent on supply of mineral ore from captive leases," the mines ministry said, while releasing the draft amendments The ministry said the government would allow the transfer at the time o M&As 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, if found feasible at the time of framing terms and conditions," the statement said. The passage of the amendment bill will enable Lafarge to sell its two plants of 5.15 million tonne per annum (MTPA) capacity in Jharkhand and Chhattisgarh to Birla Corp of KM Birla for Rs 5,000 crore.
(Source: http://economictimes.indiatimes.com/)