Rajya Sabha passes Mines and Minerals Bill; Steel, Mining & Cement sector to benefit

The government on Monday, May 2,approved an enabling legislation that will facilitate smoother mergers & acquisitions (M & A) in Cement , Mines & Minerals and Steel sector. Steel and Mining sector has been reeling under pressure recently due to fall in commodity prices globally, being a major reason for the growing NPA story recently.

Amidst chaos the Rajya Sabha managed to approve the amendments in the Mines and Minerals Development and Regulation (MMDR) act. The said bill is already approved in the Lok Sabha  and is pending  President's signature for it to become a "Law". The new amendments in place will facilitate companies to transfer mining lease, especially applicable to those that are captive. Previous law allowed only auctioning of the Mining licenses.  This marks a huge relief for those companies eyeing to merge or acquire within Steel, Mining or Cement sector. Non ability to transfer the mining lease was a big hurdle so far when it came to mergers and acquisitions in cement sector . In February this year a deal could not go through between LafargeHolcim and Birla Corp. Ltd., citing problems related to transferring mining rights.

The amended MMDR will now facilitate UltraTech cement's acquisition of Jaiprakash Associates Ltd. for Rs. 15,900 crores. Another huge benefit due to the amendments in MMDR bill is that it will help the banking sector recover its dues from the beleaguered steel  and cement companies.  The new amendments will now allow shifting of assets from stressed groups to less leveraged and better off balance sheets.

However the news has not been celebrated as of now by the companies, which have been positively affected by the amendments, as the government is mulling to put in place a one time fixed transfer fee, which can be revised from time to time. The industry is waiting for more clarity on the quantum of charges and the mechanism of its calculation as the fixed charges might be a dampener for certain deals.