Why are States divided over the mining amendment?

Why in the News

Taxing mineral rights and mineral-bearing land, which a nine-judge Constitution Bench held in Mineral Area Development Authority v. Steel Authority of India (2024) to be largely a State power, now needs conditions set by the Union under the Mines and Minerals (Development and Regulation) Amendment Act, 2026. Mineral-rich States have split on challenging it, along lines of revenue dependence and political alignment.

How does the Constitution divide power over minerals?

1. Regulation: States regulate mines under State List Entry 23. Under Union List Entry 54, Parliament can take control in the public interest, like a master switch.
2. Taxation: Separately, Entries 50 and 49 of the State List let States tax mineral rights (the right to extract minerals) and land.
3. The takeaway: Regulation and taxation sit in different entries, so the dispute is whether a regulatory power can be used to cut a taxing power.

What does the amendment change?

1. Wider central control: The Act, passed by Parliament, extends the Centre’s regulatory power from mines and mineral development to mineral-bearing land.
2. Tax bar: States may not impose fresh taxes on mineral rights or mineral-bearing land, except under conditions the Union government prescribes.
3. Past dues cancelled: Mineral taxes that States imposed but had not fully collected before the Act took effect are cancelled.
4. Clash with the ruling: The Court let Parliament limit State taxes on mineral rights, but held that Entry 54 cannot curtail their power to tax mineral-bearing land.
5. From mining to fiscal autonomy: Using a regulatory power to limit State taxes makes this a question of the fiscal autonomy, or revenue freedom, of mineral-rich States.

What is at stake for the Centre and the States?

1. The Centre’s case: Uneven, multiple State levies raise domestic mineral costs, so industries turn to imports and the exchequer bears more.
2. Lost revenue: Cancelling unrecovered dues removes a revenue source and narrows future mineral income for the major mineral-bearing States.
3. Most dependent: Minerals supply 85% of non-tax revenue in Jharkhand and 80% in Odisha, so the curbs hit them hardest.
4. Least dependent: The immediate impact is smaller in Telangana and Chhattisgarh.

Why have States responded differently?

1. Legal challenge: Karnataka, Telangana, Himachal Pradesh and Kerala plan to move the Supreme Court, saying the curbs undermine States’ fiscal powers and federalism.
2. Kerala’s added objection: The new treatment of mineral-bearing land gives the Centre wider power over the State’s coastal and forest regions.
3. Jharkhand’s warning: The Chief Minister warns that losing mineral taxes and past dues could hit social-security schemes benefiting millions.
4. Odisha’s stand: The Bharatiya Janata Party (BJP) government rejected the Opposition’s call for a special Assembly session, saying mineral revenue will not suffer.
5. Alignment over dependence: Low-dependence Telangana, ruled outside the National Democratic Alliance (NDA), joined the challenge. Madhya Pradesh, Rajasthan and Chhattisgarh have not objected, so alignment decides who sues.

How does the dispute fit India’s fiscal federalism?

1. Asymmetric design: India’s fiscal federalism gives the Centre greater taxing powers and places greater spending duties on the States.
2. Leverage over States: The Centre’s control of borrowing approvals and transfers limits States that depend on them.
3. Recurring disputes: The amendment joins earlier Centre-State disputes over Goods and Services Tax compensation, Finance Commission mandates, the National Education Policy, the Citizenship Amendment Act and All-India Services rules.

Challenges

1. Ordinary law against a ruling: Parliament is doing by ordinary law what the Court’s reading of the State List ruled out.
2. Retrospective loss: Cancelling dues already levied unsettles State budgets planned around them.
3. No bargaining forum: No standing body reconciles uniform mineral costs with States’ room to tax. Eg. The Inter-State Council last met in 2016.

Way Forward

1. Consult on conditions: The Union should frame the prescribed conditions for State mineral taxes with States through the Inter-State Council.
2. Transitional compensation: The Centre should compensate States for cancelled dues over a fixed transition period.
3. Rate ceiling, not a bar: A ceiling on State mineral levies in place of Union approval would keep costs predictable.

Conclusion

The amendment answers industry’s cost complaint by moving taxing room from mineral-rich States to the Union, against the Court’s reading of where that power lies. Whether the Supreme Court lets a regulatory entry override a taxing entry will decide the States’ planned challenges.

Key numbers

1. Mineral share of non-tax revenue, Karnataka and Madhya Pradesh: 48% and 41%.
2. Mineral share of non-tax revenue, Rajasthan: 39%.
3. Least dependent States: Telangana 11%, Chhattisgarh 6%.

Matching Previous Year Question

“[2021] Which one of the following in Indian polity is an essential feature that indicates that it is federal in character? (a) The independence of the judiciary is safeguarded. (b) The Union Legislature has elected representatives from constituent units. (c) The Union Cabinet can have elected representatives from regional parties. (d) The Fundamental Rights are enforceable by Courts of Law. ANSWER: (a)”