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Issue 30
October , 2010
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State to accept guidelines on JVs/MoUs of mines ministry

Source: Bussiness Standard, Date: October , 2010

The state steel and mines department would accept most of the draft guidelines on joint ventures (JVs) and Memorandum of Understanding (MoU) issued recently by the Department of Mines, Government of India.

"We are currently in the process of preparing our response to the draft guidelines on JVs and MoUs issued by the Union mines department. The state steel and mines department will broadly accept most of the guidelines and will submit its response by the end of this month”, an official source told Business Standard.

"The state will make recommendations for mining lease to the Centre depending on the merit of the applicants and as per the provisions of the Mines and Minerals (Development and Regulation) Act, 1957”, he added.

However, when asked as to whether the state government will exercise constraint in signing MoUs, he declined to comment on the matter.

The state government had inked MoUs with as many as 50 players in the steel & mines sector.

According to the draft guidelines issued by the Department of Mines of the Union government, the MoUs signed by the state government must be in conformity with the State Mineral Policy and must be entered into in a transparent manner and notified on the state website.

In order to be able to use the provisions of Section 11 (5) of the Mines and Minerals (Development and Regulation)-MMDR Act of 1957, there must be a clear policy on the kind of situations in which MoUs will be entered into- for instance large investment, latest or special technology, value addition or long-term ore linkage and the MoU must clearly specify the basis.

Obviously, the signing of a large number of MoUs indiscriminately, and without considering what the other party is bringing to the table is not compatible with the use of the MoU as ‘special reasons’ for the purpose of Section 11 (5) of the MMDR Act.

An MoU for exploitation of a mineral resource at a specific location (i.e. specific lease area) in anticipation of a concession or a reservation will be deemed to be incompatible with principles of fair play and equity because it will give that MoU applicant an unfair advantage in relation to other MoU applicants who apply for the same area.

Needless to say, it would contradict the policy of ‘first in time’ for non-notified areas or ‘most meritorious’ for notified areas, as the case may be, the Ministry of Mines had stated categorically in its guidelines.

In case MOU/JV is treated as special category, it is necessary to make its provisions enforceable, and as such the state government must send all details of the MOU/JV along with a proposal to make it relating to the MoUs/JVs in the context of their application in both reservation and concession cases.It may be noted that while the above guidelines elaborate the process and procedures, they do not specify the policy and content of the MoUs since they have to be state specific.

In order to enable this to be done, it will be necessary for the states to issue a comprehensive circular and notify it, specifying the policy and content, and including therein the details of these guidelines in so far as procedures and consequences are concerned, subject to any variation that the state government may consider desirable.

The state governments will also need to enter into supplementary MoUs with existing MoU companies to enable the conditionalities to be fulfilled, and while doing so may ensure that the process of entering into supplementary MoUs filters out routine MoUs that may have been entered into earlier.

The list of all qualifying MoUs (including supplementary MoUs) may then be put up by the state government on its website.

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