KOLKATA (miningweekly.com) - The Indian government has liberalised the transfer of mining leases following merger and acquisition activities between companies; however, it was decided that the new owner of the mining asset would be liable to pay fees to the government.

According to an official, the Mines Ministry was currently working out the modalities of a levy on such a transfer.

He said that while details were currently in the works, the transfer fee payable to the government would differ from case to case and the benchmark was likely to be the auction price of a similar mine in the same region.

It may be noted that earlier in the month, the government introduced to Parliament an amendment to the Mines, Minerals Development and Regulation Act, seeking the transfer of mining leases from one company to another in the case of mergers and acquisitions, and with the aim of facilitating consolidation in the industry.

Earlier, several proposals of mergers and acquisitions in industries such as cement hit roadblocks as the erstwhile legislation did not permit the transfer of mining leases for limestone from one company to another.

The amendment, according to a statement of the Mines Minister, read: “...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 shall be permitted to be transferred subject to compliance with terms and conditions as prescribed by the federal government”.

However, off the record, industry officials conceded that while the government aimed to usher in greater flexibility in the mining industry, the levy of a transfer fee payable to the government and its benchmarking to auction price would substantially increase the cost of mergers and acquisitions for mining companies.

It might be recalled that Lafarge SA’s Indian operations scrapped an agreement to sell its cement production units, as it was not permitted to transfer lease of its captive limestone mines to the prospective buyer under existing legislation. Similarly, Ultra Tech Cement was also forced to enter into renegotiations with buyers after government turned down permission to transfer mining leases of the latter’s limestone mines.

Mines Ministry officials said that the amendment was also backed by commercial banks and financial institutions as the latter would be able to seize mining assets and subsequently sell off the assets in cases of loan default by the rising number of stressed companies in the mining and mineral sectors.