Why in the News

Parliament has passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2026, which restricts the power of States to impose levies on mineral rights and mineral bearing lands. The change follows a Supreme Court ruling that had upheld exactly that State taxing power and permitted recovery of arrears going back to 1 April 2005. A legislative measure aimed at investor certainty now sits directly against a judicially affirmed source of State revenue.

What is the Mines and Minerals (Development and Regulation) Act, 1957?

Governing statute: The Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) is the central law regulating the grant of mineral concessions and the development of mines in India. It is administered by the Ministry of Mines.
Union declaration: Section 2 of the Act declares it expedient in the public interest that the Union take control of the regulation of mines and mineral development, which activates Parliament’s competence over the field.
Concession regime: No person may undertake reconnaissance, prospecting or mining except under a licence or lease granted under the Act and the rules made under it.
Auction based allocation: The 2015 amendment made auction the sole method for granting mineral concessions for major minerals, replacing discretionary allotment.
Minor minerals carve out: Section 15 empowers State governments to frame rules for granting concessions in respect of minor minerals, while the power to notify a mineral as minor rests with the Central government.

What is royalty in mining?

Definition: Royalty is the payment a lessee makes to the State for the privilege of extracting and removing a mineral from the land, calculated per tonne or as a percentage of sale value.
Statutory rates: Royalty rates for major minerals are fixed in the Second Schedule of the MMDR Act by the Central government, so a State cannot revise them on its own.

What is a tax on mineral bearing land?

Definition: A tax on mineral bearing land is a State levy imposed on the land itself, with the mineral yield of that land used as the measure of the tax.
Distinct head: It is levied separately from royalty and from the auction premium a bidder pays to win a mine, and it is the head of levy the current amendment restricts.

Current status of States’ power to tax mineral rights in India

Judicially affirmed right: The Supreme Court upheld the right of States to impose taxes on mineral rights and mineral bearing lands, and separately permitted recovery of arrears going back to 1 April 2005.
State levies already in force: Jharkhand imposed a mineral bearing land tax on iron ore at Rs 100 per tonne, subsequently hiked, and Tamil Nadu set a tax on limestone at Rs 160 per tonne.
Scale of the levy structure: States impose 14 types of taxes, charges, fees and levies, including royalty and auction premium, and the rates of royalty and taxes vary across States.
Statutory deductions already fixed centrally: Lessees additionally pay into the District Mineral Foundation (DMF) and the National Mineral Exploration Trust (NMET) at rates pegged to royalty, which the Centre sets.
Position after the amendment: The new law restricts the State levies on mineral rights and mineral bearing lands, and a government fact sheet states that States will continue to receive the overwhelming share of mining revenue.

Constitutional provisions related to the taxation of mineral rights

Article 246 with the Seventh Schedule: Distributes legislative competence between Parliament and the State legislatures across the Union, State and Concurrent Lists.
Entry 54, List I: Gives Parliament power over the regulation of mines and mineral development to the extent declared by law to be expedient in the public interest.
Entry 23, List II: Gives States power over the regulation of mines and mineral development, expressly subject to Entry 54 of List I.
Entry 50, List II: Gives States the power to levy taxes on mineral rights, expressly subject to any limitations imposed by Parliament by law relating to mineral development.
Entry 49, List II: Gives States the power to levy taxes on lands and buildings, the head under which mineral bearing land taxes are framed.
Article 265: Bars the levy or collection of any tax except by authority of law.

Why has Parliament moved to restrict State levies?

Certainty and predictability: The stated rationale is to provide greater certainty and predictability in the mining sector for project developers.
Investment flows: A stable levy structure is intended to facilitate investment flows into a sector the Union treats as vital to growth.
Cost pass through: Higher State levies feed into the price of minerals and therefore into infrastructure costs downstream.
Price uniformity: The change is also read as a bid to bring some degree of uniformity in the prices of major minerals, since royalty and tax rates currently differ from State to State.
Critical minerals push: The Union government has launched a critical mineral mission, and a more predictable framework is meant to support that programme.

Why do States read the amendment as an erosion of fiscal federalism?

Loss of an affirmed revenue head: States moved to raise revenue from mining only after the Supreme Court affirmed that they could, and the amendment removes that opening.
Concentration of dependence: For mineral rich States such as Odisha, Jharkhand and Chhattisgarh, revenue from this channel accounts for a significant share of non tax revenue.
Narrow revenue base: State governments already have limited avenues to raise resources on their own, so each restriction on a taxing head weighs heavily.
Arrears at stake: The right to recover arrears from 1 April 2005 represented a large one time accrual that the restriction places in doubt.
Centre State friction: The apprehension is expressed as a concern about State revenues in particular and fiscal federalism in general, which needs to be addressed rather than assumed away.

What does the tax burden on Indian mining actually look like?

Effective tax rate: The effective tax rate in India is higher than 50 percent of revenues, according to a report on States’ Best Practices in Mining by FIMI-EY.
Comparative burden: The same report places the effective rate in other countries at 35 to 40 percent of revenues.
Cumulative structure: The Indian figure is the result of stacking royalty, auction premium, statutory contributions and State levies, and not of any single rate.
Rationalisation as the fix: Rationalisation of taxes and royalties is presented as the step that would facilitate greater investor interest in the sector.

What do cross country comparisons show, and how far does the evidence go?

Limits of the source evidence: The comparison offered is a single aggregate figure of 35 to 40 percent, with no individual country named, so it establishes a gap rather than a model to copy.
Australia: Mineral royalties are a State subject, and Western Australia levies ad valorem royalties on iron ore without a federal ceiling on State rates.
Chile: The mining royalty law of 2023 combines an ad valorem component with a margin linked component on large copper producers, and caps the combined burden on a firm.
South Africa: The Mineral and Petroleum Resources Royalty Act, 2008 sets a formula based royalty that moves with the producer’s profitability and with whether the mineral is refined.
Canada: Mining taxes are levied by provinces such as Ontario and Quebec on mine profits, layered above federal corporate income tax.

Why does the amendment set investor certainty against a judicially affirmed State right?

Reversal of an outcome, not of a principle: The Court affirmed the competence of States under the Constitution, and Parliament has used its own competence to restrict the exercise of that power.
Two legitimate claims: A predictable national mining framework is a genuine requirement for large, long gestation projects. A stable taxing head is a genuine requirement for a State with few own revenue sources.
Uniformity has a price: Uniform mineral prices across States are achieved by removing the very differentiation that reflected each State’s own fiscal need.
Arrears create the sharpest edge: The recovery window from 1 April 2005 was the largest single revenue expectation created by the ruling, and it is the first casualty of the restriction.
Assurance without a mechanism: The assurance that States will keep the overwhelming share of mining revenue rests on royalty and statutory contributions whose rates the Centre alone fixes.

Major debates surrounding the taxation of mineral rights

Is royalty a tax: A seven judge Bench in India Cement Ltd. v. State of Tamil Nadu (1989) held royalty to be a tax, and a nine judge Bench in Mineral Area Development Authority v. Steel Authority of India (2024) held by an 8 to 1 majority that royalty is a contractual consideration and not a tax, restoring the States’ Entry 50 power.
Legislative override: The dispute is whether a statute that removes a taxing power after a ruling is a permissible change in the legal basis or an impermissible override of a binding judgment under Article 141.
Retrospective recovery: Recovery of arrears from 1 April 2005 raises the question of whether long settled project economics can be reopened, against the States’ claim to revenue already lawfully due.
Uniformity versus autonomy: National price uniformity for major minerals is set against the constitutional design that lets a State calibrate levies to its own resource endowment.
Compensation gap: There is no settled empirical answer on what mineral rich States lose in absolute terms, since the 14 State levies are not reported on a common basis across States.

Challenges to the mineral concession framework after the amendment

Revenue substitution for mineral States: States losing a taxing head have no equivalent replacement within their own competence. e.g. Odisha, which draws a large part of its non tax revenue from mining, has no comparable own source levy to fall back on.
Litigation risk: A statute narrowing a power the Court affirmed invites a fresh constitutional challenge, prolonging exactly the uncertainty the amendment targets. e.g. the India Cement to Mineral Area Development Authority sequence ran for 35 years before a settled answer emerged.
Auction premium distortion: Aggressive premium bidding in auctions inflates costs regardless of tax rationalisation. e.g. several iron ore blocks in Odisha were won at premiums exceeding 100 percent of sale value, squeezing operating margins.
Exploration deficit: Rationalising levies does not fix the shortage of drilled and proved resources that investors actually need. e.g. India has explored only a small fraction of its obvious geological potential area despite the National Mineral Exploration Trust being funded since 2015.
Clearance and land bottlenecks: Forest, environment and land acquisition delays, not levy rates, hold up most mine starts. e.g. blocks in the Hasdeo Arand coalfield in Chhattisgarh have stalled for years over forest clearance and Gram Sabha consent.
District Mineral Foundation utilisation: Funds meant for mining affected communities remain unspent or diverted, weakening the social licence for expansion. e.g. DMF collections have exceeded Rs 1 lakh crore cumulatively, with large unspent balances reported in mineral rich districts.
Critical mineral import dependence: Domestic levy reform does not address dependence on imported processed minerals. e.g. India imports the bulk of its lithium and cobalt requirements for battery manufacturing.

Conclusion

Parliament has restricted the States’ power to tax mineral rights and mineral bearing lands, undoing in law the revenue consequence of a ruling that had affirmed that power and allowed arrears from 1 April 2005. Investor certainty has been purchased with the tax autonomy of the States that hold the minerals, and the assurance that States keep the overwhelming share of mining revenue rests on rates the Centre alone sets. The measure has been passed by both Houses of Parliament; the source states no further date or next step beyond that stage. Resolving the resulting Centre State friction, not the levy structure alone, is what will determine whether the new framework actually attracts investment.

Foundational Context: Mining in India

Scale of the sector: India produces 95 minerals, covering fuel, metallic, non metallic, atomic and minor minerals, and mining contributes roughly 2.5 percent of Gross Domestic Product (GDP) including the associated quarrying activity.
Global standing: India is among the world’s largest producers of coal, iron ore, bauxite, chromite and mica, and is the second largest coal producer globally.
Ownership principle: Minerals vest in the State government where they occur, except in offshore areas and for atomic minerals, where they vest in the Union.
Classification: Minerals are divided into major minerals and minor minerals, with minor minerals such as sand, ordinary clay and building stone regulated by State rules under Section 15 of the MMDR Act.
Institutional set up: The Geological Survey of India (GSI) carries out regional exploration, the Indian Bureau of Mines (IBM) oversees conservation and scientific mining, and the Directorate General of Mines Safety (DGMS) regulates safety.

Constitutional Framework Governing Mineral Taxation and Federal Finance

Article 245: Sets the territorial extent of laws made by Parliament and by State legislatures.
Article 246: Distributes legislative power across the three Lists of the Seventh Schedule.
Entry 54, List I: Union control over the regulation of mines and mineral development to the extent declared by Parliament.
Entry 23, List II: State power over regulation of mines and mineral development, subject to Entry 54 of List I.
Entry 50, List II: State power to tax mineral rights, subject to limitations imposed by Parliament by a law relating to mineral development.
Entry 49, List II: State power to tax lands and buildings.
Article 141: Makes the law declared by the Supreme Court binding on all courts within India.
Article 265: Bars levy or collection of any tax except by authority of law.
Article 280: Provides for the Finance Commission, which recommends the sharing of Union taxes with the States.

Laws and Rules Governing Mining in India

Mines and Minerals (Development and Regulation) Act, 1957: The parent statute for mineral concessions and mineral development.
Second Schedule: Fixes royalty rates for major minerals centrally.
Section 15: Empowers States to make rules for minor mineral concessions.
MMDR Amendment Act, 2015: Introduced auction as the sole route for granting major mineral concessions.
Section 9B and Section 9C: Created the District Mineral Foundation for mining affected communities and the National Mineral Exploration Trust for exploration funding.
MMDR Amendment Act, 2021: Removed the distinction between captive and merchant mines and eased the transfer of mineral concessions.
MMDR Amendment Act, 2023: Created the exploration licence for deep seated minerals and empowered the Centre to exclusively auction 24 critical and strategic minerals.
MMDR Amendment Act, 2025: Widened support for critical mineral recovery, including recovery from mine waste and tailings.
Mines Act, 1952: Governs the health, safety and working conditions of persons employed in mines.
Offshore Areas Mineral (Development and Regulation) Act, 2002: Regulates mineral development in India’s territorial waters and exclusive economic zone.
Mineral Conservation and Development Rules, 2017: Prescribe scientific mining, conservation and mine closure obligations.
Minerals (Evidence of Mineral Contents) Rules, 2015 and Mineral (Auction) Rules, 2015: Govern the exploration thresholds and the auction procedure for major minerals.

Back2Basics: National Critical Mineral Mission

What it is: A central mission to build self reliance across the critical mineral value chain, from exploration and mining to processing, recycling and recovery from waste.
Approved: By the Union Cabinet in January 2025.
Administering ministry: The Ministry of Mines.
Duration: Covers the period from 2024-25 to 2030-31.
Outlay: An outlay of about Rs 16,300 crore, with a further expected investment of about Rs 18,000 crore by public sector undertakings and other agencies.
Exploration target: A large programme of exploration projects by the Geological Survey of India within India, along with exploration in offshore areas.
Overseas component: Acquisition of critical mineral assets abroad by Indian public and private entities, supported by trade and diplomatic engagement.
Circularity component: Promotion of recycling of end of life products and recovery of critical minerals from mine tailings and overburden.
Stockpiling: Creation of a stockpile of critical minerals to insulate domestic industry from supply disruption.
Regulatory support: Fast tracking of regulatory approvals for critical mineral projects, alongside the exclusive Central auction of the notified critical and strategic minerals.

Government Initiatives

National Critical Mineral Mission: Secures the critical mineral supply chain through domestic exploration, overseas asset acquisition, recycling and stockpiling under the Ministry of Mines.
National Mineral Policy, 2019: Sets the policy framework for sustainable mining, exploration incentives and a transparent auction regime.
Star Rating of Mines: A self assessment and verification system run by the Indian Bureau of Mines rating mines on scientific mining and sustainability parameters.
Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY): Implemented through District Mineral Foundations to fund drinking water, health, education and livelihood works in mining affected districts.
National Geoscience Data Repository and the exploration licence regime: Open access geoscience data and a dedicated licence to draw private explorers into deep seated mineral search.

Key Facts about Indian Mining

Ministry: The Ministry of Mines administers the MMDR Act, other than for coal, lignite, petroleum, natural gas and atomic minerals.
Critical minerals list: India notified a list of 30 critical minerals in 2023, of which 24 are auctioned exclusively by the Centre.
District Mineral Foundation contribution: Lessees contribute 10 percent of royalty for concessions granted after 12 January 2015 and 30 percent for earlier concessions.
National Mineral Exploration Trust contribution: Set at 2 percent of royalty paid by the lessee.
Geological Survey of India: Established in 1851, headquartered at Kolkata, and the principal agency for regional mineral exploration.

Challenges in the Mining Sector

Long clearance timelines: A block cleared at auction still waits years for forest, environment and consent approvals. e.g. bauxite mining in the Niyamgiri hills of Odisha was halted after Gram Sabhas exercised their veto under forest rights law.
Illegal mining: Unregulated extraction of minor minerals erodes State revenue and damages river systems. e.g. sand mining in the Yamuna and Sone river beds has repeatedly drawn National Green Tribunal intervention.
Rehabilitation deficit: Displacement from large mines is inadequately compensated and land losers rarely regain livelihoods. e.g. displacement in the Talcher and Ib Valley coalfields of Odisha has produced long running resettlement disputes.
Mine safety: Accidents in underground and rat hole operations continue despite the Mines Act framework. e.g. the Ksan mine flooding in Meghalaya in December 2018 trapped and killed rat hole miners in an illegal coal pit.
Low value addition: India exports raw and semi processed ore and imports finished products. e.g. iron ore fines are exported while high grade steel inputs are imported back.
Exploration underinvestment: Private participation in greenfield exploration remains thin despite the exploration licence. e.g. only a small share of India’s obvious geological potential area has been explored in detail.
Import dependence in critical minerals: Processing capacity, not deposits alone, is the binding constraint. e.g. India relies on imports for nearly all its rare earth magnet requirements.

Way Forward

Institutionalise Centre State consultation on levies: Route mineral levy changes through a standing Centre State forum so that revenue impacts are quantified before a restriction is legislated.
Publish a common levy dashboard: Report the 14 State levies on a uniform basis so that the effective tax rate claim of over 50 percent of revenues can be verified block by block.
Compensate the transition: Provide a time bound, formula based transfer to mineral rich States for the revenue head withdrawn, on the model used for other tax transitions.
Rationalise auction premium: Cap or stagger premium payments so that the auction price, rather than the tax rate, stops inflating the delivered cost of minerals.
Front load exploration: Expand National Mineral Exploration Trust funded drilling and release geoscience data before auction so that bids reflect proved resources.
Ring fence District Mineral Foundation spending: Enforce end use audit of DMF funds on drinking water, health and education in mining affected districts to rebuild the social licence for expansion.

“[2025] Consider the following statements:
Statement I: In India, State Governments have no power for making rules for grant of concessions in respect of extraction of minor minerals even though such minerals are located in their territories.
Statement II: In India, the Central Government has the power to notify minor minerals under the relevant law.
Which one of the following is correct in respect of the above statements?
(a) Both Statement I and Statement II are correct and Statement II explains Statement I
(b) Both Statement I and Statement II are correct but Statement II does not explain Statement I
(c) Statement I is correct but Statement II is not correct
(d) Statement I is not correct but Statement II is correct

Parliament curbs States’ power to tax mineral rights through MMDR Amendment Bill, 2026