India to revisit captive mine transfer charge

KOLKATA (miningweekly.com) – The Indian government will take a relook at charges liable to be paid to the government for cases where captive mines were transferred outside the auction process.

An official said that the Mines Ministry has received several industry representations seeking exemptions from payment of such transfer charges as it has a negative impact on corporate functioning and, hence, the government has an “open mind” on revisiting the issue.

Citing the most repeated complaints received from industry, he said that the transfer charge is proving to be the biggest deterrent to corporate restructuring, as it becomes payable when companies within the same corporate group or conglomerate are restructured despite ownership and management of the captive mine not undergoing any change of status.

Industry representations, including one from the Associated Chambers of Commerce, have sought complete exemptions from such a transfer charge as it has brought consolidation or restructuring in mineral and mineral processing industries to a complete halt, the official added.

Last year, the Indian government amended the Mines, Minerals Development and Regulation Act 2015, permitting the transfer of mining rights in the case of captive mines secured outside the auction process. However, the amendment stipulated that any company acquiring the captive mine would need to pay 80% of the royalty payable over the tenure of the mining rights and that this is in addition to the normal royalty rate payable to the provincial governments.

Industry representations received by the Mines Ministry have pointed out that there is no clarity in the amendment about whether the transfer charge would kick in when a captive mine is transferred within the same group of companies. The provision merely states that the charge will be payable on transfer of the mine, but is silent on the ownership status of the asset.

Hence, the industry fears that any corporate restructuring effected under current legislation could be open to legal challenge, the official adds.

However, he says that legal advice sought has indicated that the transfer charge is tenable as it will be treated as a premium for preferential allotment of the captive mine to the company outside the auction process without having undertaken competitive bids.

A final decision will need to reconcile differing opinions, even within the government, as one section maintains that transfer of mining rights is a globally accepted practice that enables companies to achieve economies of scale and greater financial viability through amalgamation within group companies, the official adds.