`Mines Act amendments may spur M&As in cement, steel sectors`

Mumbai: Amendments to the Mines and Minerals (Development and Regulation) Act are expected to streamline the consolidation process in cement and steel industry and clear the way for large merger and acquisition deals, a report said.

The amendments will enable companies to transfer captive mines which was acquired by them in the pre-auction era, India Ratings and Research (Ind-Ra) said in its report here.

The ratings agency believes that this will clear the way for large merger and acquisition transactions that have been stuck due to the restriction on the transfer of mines as per an earlier amendment to the Mines and Mineral Act in January 2015.

This could also trigger acquisitions in the steel sector, primarily by medium and small players since the larger players are well placed with captive mines.

The Act also defines 'captive' as the use of the entire quantity of mineral extracted under the mining lease, which will prohibit the sale of excess limestone.

Ind-Ra noted that the Act empowers the government to charge fees on such transfers. However, the government has not specified the calculation method which will be used for the transfer fee, and thus, clarification for the same is awaited, which will lead to the smoothening of the process of transfer of mines, it said.

The rating agency believes that the absence of clear guidelines related to transfer fees could play spoilsport to the consolidation process in the cement industry.
Rajya Sabha cleared amendments to the Mines and Minerals (Development and Regulation) Act-2016 on May 2.

The Act allows for transfer of mining lease which were acquired other than by an auction and used for captive purposes. The amendment, however, has come with a rider of transfer fees, which may lead to higher capital cost for the acquirer.