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Cabinet approves amending MMDR Act

10 March, 2016

The National Democratic Alliance (NDA) government on Thursday gave its approval to change rules and allow transfer of captive mining leases not granted through auction.

The Union cabinet on Thursday gave its nod to amend the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR) thereby paving the way for fruition of many high-value deals. Cement acquisition deals between Jaiprakash Associates Ltd and Aditya Birla Group’s UltraTech Cement Ltd, and Reliance Infrastructure Ltd and Birla Corp. Ltd are some cases in point. They were stuck as transfer of captive limestone mines allotted for cement production was not allowed.

VCCircle on 8 March reported about the proposed move.

“The amendment will allow transfer of captive mining leases not granted through auction. Transfer of captive mining leases, granted otherwise than through auction, would 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 government said in a statement.

UltraTech Cement signed a binding memorandum of understanding with Jaiprakash Associates on 28 February for acquisition of the latter’s cement assets. The Rs16,500-crore deal will help UltraTech Cement increase its capacity to 90.7 million tonnes per annum (mtpa) further strengthening its position as the market leader. Reliance Infrastructure and Birla Corp. will also be beneficiaries of the government’s move on the issue. On 5 February 2016, Reliance Infrastructure, in order to retire its debt, sold its cement business to Birla Corp. for Rs4,800 crore.

Spokespersons for Jaiprakash Associates, Reliance Infrastructure, UltraTech Cement and Birla Corp. couldn’t be immediately reached.

“The transfer provisions will also facilitate banks and financial institutions to liquidate stressed assets where a company or its captive mining lease is mortgaged,” the government statement added.

The financial position of commercial banks has become precarious as it is estimated by the government that stressed assets amounting to Rs8 trillion are lying in the system.

To attract participation in mining auctions conducted by various states, the government on 4 March notified the Mineral Concession Rules, 2016 to allow transfer of such leases, in the event of ownership changing hands. The government’s move is also an attempt to avoid future high-value deals such as the ones mentioned above getting stuck.


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Cabinet approves amending MMDR Act

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