India: Cement makers in demand

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Updated Wed, 14 Jan 2015 15:46:56 GMT

Shares of 14 cement makers rose by 0.74% to 5.24% at 10:26 IST on BSE after the government promulgated an Ordinance amending mining laws under which all iron ore, bauxite, limestone, and manganese mines will henceforth be auctioned.

The Ramco Cement (up 5.24%), J K Cement (up 4.24%), Birla Corporation (up 3.47%), Kakatiya Cements (up 3.36%), Saurastra Cement (up 2.72%), HeidelbergCement India (up 2.46%), UltraTech Cement (up 2.43%), India Cements (up 2.40%), Prism Cement (up 2.22%), JK Lakshmi Cement (up 1.43%), Mangalam Cement (up 1.42%), ACC (up 1.41%), Grasim Industries (up 1.07%) and Ambuja Cements (up 0.74%), edged higher. Shree Cement, however, was down 0.14%.

The S&P BSE Sensex was down 19.97 points, or 0.07% at 27,405.76.

The Ministry of Mines after trading hours yesterday, 13 January 2015, said that the government has promulgated the Mines and Minerals (Development and Regulation) (Amendment) Ordinance, 2015 on 12 January 2015. The ordinance amends certain provisions of the MMDR Act, 1957.

Auction of minerals is critical to steel, aluminum and cement makers.

The Ministry of Mines said that the promulgation of the ordinance became necessary to address the emergent problems in the mining industry. Essentially, through the Mines and Minerals (Development and Regulation) (Amendment) Ordinance, 2015, the government intends to remove discretion in grant of mineral concessions.

Henceforth, all mineral concessions would be through auctions, thereby bringing in greater transparency and removing of discretion. Unlike in the 1957 Act, there would be no renewal of any mining concession. The tenure of the mineral concession has been increased from the existing 30 years to 50 years. Thereafter, the mining lease would be put up for auction (and not for renewal as in the earlier system).

The Ministry of Mines said that Sub-Section 5 and 6 of Section 8(a) of the ordinance provides that the mining leases would be deemed to be extended from the date of their last renewal to 31 March 2030 in the case of captive miners and till 31 March, 2020 for the merchant miners or till the completion of the renewal already granted, if any, whichever is later. Thus, no mining lease holder is likely to be put into any disadvantaged condition. It is expected that this would immediately permit such closed mines to start their operations, the Ministry of Mines said in a statement.

The ordinance proposes to setup a National Mineral Exploration Trust created out of contribution from the mining lease holders. This would allow the government to have a dedicated fund for undertaking exploration. In addition, the transferability provision (in respect of mining leases to be granted through auction) would permit flow of greater investment to the sector and increasing the efficiency in mining.

In respect of ten minerals in Part C of First Schedule like iron ore, manganese, bauxite, copper, gold, etc., the requirement that a state government should obtain the prior approval of the central government before grant of mineral concession has been done away with. Similarly, approval of mining plan by the government would no longer be mandatory as a provision has been added under 5(2) (b) permitting the state governments to devise a system for filing of a mining plan obviating need for approval by the central government.