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Government clears proposal to amend MMDR Act; move to boost M&As

It will allow M&As of companies and will facilitate banks, financial institutions to liquidate stressed assets where a company or its captive mining lease is mortgaged.

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The government on Thursday cleared a proposal to amend the MMDR Act to allow transfer of captive mining leases not granted through auction.

The move is aimed at allowing mergers and acquisitions of companies and facilitating banks and financial institutions to liquidate stressed assets where a company or its captive mining lease is mortgaged.

"The Union Cabinet chaired by Prime Minister Narendra Modi has given its approval for the amendment to the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act, 1957)," an official statement from the Ministry of Mines said.

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 the supply of mineral ore from captive leases," the statement said.

The transfer provisions will also facilitate banks and financial institutions to liquidate stressed assets where a company or its captive mining lease is mortgaged, it said.

The amendment will benefit lessees desirous of transferring the captive leases not granted through auction, it added.

The government also said the move will benefit banks and financial institutions and does not entail any recurring or non-recurring expenditure on the government.

The MMDR Act, passed by Parliament in March last year, only allows transfer of mining leases in cases where the mine has been acquired through auction.

"The MMDR Act, 1957, as amended through the MMDR Amendment Act, 2015, restricted the scope of transferability of concessions granted through auction. It was restricting the mergers and acquisitions of companies and was impeding the ease of doing business for companies dependent on the supply of mineral ore from captive leases," the statement said.

The provision was coming in the way of banks and financial institutions to liquidate stressed assets where a company or its captive mining lease is mortgaged, it added.

Through the amendment, the government wants to insert a clause that says, "Provided that where a mining lease has been granted otherwise than through auction and where minerals from such mining lease are being used for captive purpose, such mining lease will be permitted to be transferred subject to compliance with terms and conditions as prescribed by the central government," the ministry had earlier said in a statement.

The move will allow mergers and acquisitions (M&As) worth billions of dollars in the domestic market, especially in the cement sector where several such deals are stuck like those of Jaiprakash Associates and Lafarge, industry insiders has said earlier.  

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