No transfer of old mining leases may hit M&As

The govt will not permit the transfer of mining leases that were not sold in auctions

The government will not permit the transfer of mining leases that were not sold in auctions. This could affect big deals in downstream projects linked to natural resources.

The government's decision is likely to create problems for the sale of Lafarge's two cement units, priced at Rs 5,000 crore, to Birla Corp. Lafarge, which wants to merge with Holcim, was asked by the Competition Commission of India to sell these two units before the end of the year. Each unit has a captive limestone mine.

Another major deal likely to be affected is the takeover of Jaypee Cement's plants by Kumar Mangalam Birla's UltraTech.

In a meeting on Monday between officials of the mines and law ministries, it was stated that old mining leases given out on discretion would not be allowed to change hands in line with the Mines and Minerals (Development and Regulation) Amendment Act, 2015.

"The ownership transfer of old mining leases will not be possible," said a mines ministry official, on the condition of anonymity.

The mines ministry had sought the law ministry's opinion as many major mergers and acquisitions in the mining sector were stalled after the new law came into force.

According to the changed Act, which was passed by Parliament in March, "The transfer of mineral concessions shall be allowed only for concessions which are granted through auction." However, the law still has a section that gives the central government power to make rules for transfer of mines.

Under Section 12(A) of the law, a holder can transfer his mining or prospecting-licence-cum-mining lease to any person eligible to hold such a lease. The seller is required to issue a 90-day notice to the state government for permission. The transfer becomes effective only after that. The state government can disapprove of the transfer.
ROADBLOCKS LIKELY

• The government's decision is likely to create problems for the sale of Lafarge's two cement units, priced at Rs 5,000 crore, to Birla Corp
• Each unit has a captive limestone mine
• Another major deal likely to be affected is the takeover of Jaypee Cement's plants by Kumar Mangalam Birla's UltraTech