Mining, money & federalism: Why a new law is at the centre of a political tussle in Odisha

Why in the News

Parliament has passed the Mines and Minerals (Development and Regulation) Amendment Act, 2026. It sets a uniform national tax framework for major minerals and limits the power of States to levy taxes on mining lands. The step overrides the financial effect of Mineral Area Development Authority v. Steel Authority of India (2024). A nine judge Constitution Bench had held there, by a majority of 8 to 1, that States hold the power to tax mineral rights and mineral bearing lands. The contest is over who collects the revenue that mining generates, and Odisha is where it is sharpest. Three States have taken the amendment to the Supreme Court, so a question the largest Bench to hear it had settled is open again.

What does the 2026 amendment change about who can tax mining?

1. A bar on State levies: The new Section 9D provides that no tax, cess or other levy shall be imposed by a State on mineral rights or on mineral bearing lands, whether computed on mineral quantity, mineral value, royalty payable or otherwise.
2. A conditional exception only: A State may levy only in accordance with such conditions or restrictions as the Central Government prescribes.
3. Wider central reach: Amendments to Section 2 and Section 13 extend the Centre’s control to mineral bearing lands.
4. Rule making is centralised: The Centre is given sole authority to frame the rules that restrict the taxing power of States over minerals.

What did the Supreme Court hold in 2024?

1. Royalty on extraction: States were held competent to levy royalty on the extraction of minerals from land within the State.
2. Tax on mineral bearing land: The same ruling held that States may tax the lands which comprise mines and quarries.
3. The central law was read as no bar: The Bench held that the parent mining statute did not take away the taxing competence of the States in this field.
4. Past dues were opened up: Recovery of dues for earlier years was permitted in staggered instalments, which is the origin of the arrears claims now in dispute.

Why is Odisha the sharpest site of the dispute?

1. The stakes as the Opposition states them: The Biju Janata Dal (BJD) puts the cost to Odisha at Rs 12,000 crore a year in foregone revenue and Rs 1 lakh crore in arrears.
2. The procedural objection: A letter from the former Chief Minister of Odisha to the State’s ruling party Members of Parliament records that the Bill was passed with less than 10 minutes of discussion in the Lok Sabha.
3. The framing of the contest: The Opposition presents the law as an attack on federalism and on the financial rights of the State rather than as a technical tax measure.
4. Street level escalation: The Congress and the Left have announced a gherao of the Odisha Assembly on 29 September.
5. The legal challenge is already under way: Karnataka, Kerala and Telangana have moved the Supreme Court against the amendment, and the Odisha unit of the Congress has said it will do the same.
6. Why the State is so exposed: The economy and the politics of Odisha are closely tied to mining, so a change in mineral taxation reaches its budget directly.

What is the case made for a uniform national framework?

1. Multiple levies deter industry: On the State government’s own argument, arbitrary and multi level levies on mineral bearing land would cause extensive damage to the industrial ecosystem of the State.
2. Mining revenue has already risen sharply: The State’s Steel and Mines Minister puts earnings from the mining sector at about Rs 50,000 crore, against about Rs 5,000 crore before 2014.
3. A second channel already reaches States: States continue to receive money for mining affected areas through the District Mineral Foundation (DMF), a non profit trust set up by the State government.
4. The earlier reform is offered as the cause: That rise in receipts is attributed to the last amendment of the parent Act in 2015, which moved major mineral concessions to competitive auction.

Challenges to the MMDR Amendment Act, 2026

1. A statute answering a constitutional finding invites a second round: Where a Bench locates a taxing power in the State List, an ordinary central law restricting its exercise raises the question of legislative competence rather than settling it. Eg. Royalty and cess on minerals has been litigated repeatedly since the India Cement judgment of 1990.
   The Fix: Route the change through a constitutional amendment or a Finance Commission mediated compensation formula rather than through a bar inserted by ordinary law.
2. Producing districts carry the costs of mining and lose the levy: Land degradation, displacement and water stress sit in the mining district, with the taxing power moving upward. Eg. The iron ore districts of Keonjhar and Sundargarh in Odisha carry heavy overburden dumping and haulage traffic.
   The Fix: Make a fixed share of central mineral receipts a statutory entitlement of the producing district rather than a discretionary allocation.
3. Revenue predictability for States falls: A levy that can be permitted or withdrawn through prescribed central conditions cannot be budgeted for with confidence. Eg. Mineral rich States had already built projected receipts into their medium term fiscal statements.
   The Fix: Fix the permitted State levy in the Act itself with a floor, so it is not alterable by executive prescription.
4. Uniformity ignores unequal mineral endowment: A single national framework treats a State with large reserves and a State with none as comparable for taxation purposes. Eg. Odisha, Jharkhand and Chhattisgarh together account for the bulk of India’s iron ore and coal output.
   The Fix: Build an endowment weighted transfer into the framework so producing States are not equalised downward.
5. Litigation freezes investment decisions: A pending challenge to the taxing framework leaves both States and lessees uncertain about liability for the interim period. Eg. The 2024 ruling itself came at the end of litigation running over three decades on the same question.
   The Fix: Seek an early and time bound hearing along with an interim arrangement on collection, so liability does not accumulate unresolved.

Conclusion

The dispute is no longer about the rate at which minerals are taxed. It is about whether a fiscal power the Court located with the States can be narrowed by ordinary central legislation. Until the challenge is decided, mineral rich States must budget for revenue they may not be permitted to collect. The marker to watch is whether the Court treats the new bar as a permissible exercise of the Union’s mining power or as an encroachment on a State legislative field.

Back2Basics: Mines and Minerals (Development and Regulation) Act, 1957

1. What it governs: It is India’s principal law for the development and regulation of mines and minerals.
2. The Union’s declared control: The Act declares that the Union should take control of mining and mineral development to the extent provided by the Act.
3. Major and minor minerals: Major minerals are regulated centrally under this Act, and minor minerals such as sand, building stone and ordinary clay are governed by State rules.
4. The 2015 overhaul: That amendment moved allocation of major mineral concessions to auction, created the District Mineral Foundation and the National Mineral Exploration Trust (NMET), and strengthened penalties for illegal mining.

Matching Previous Year Question

“[2025] Consider the following statements: I. India has joined the Minerals Security Partnership as a member. II. India is a resource-rich country in all the 30 critical minerals that it has identified. III. The Parliament in 2023 has amended the Mines and Minerals (Development and Regulation) Act, 1957 empowering the Central Government to exclusively auction mining lease and composite license for certain critical minerals. Which of the statements given above are correct? (a) I and II only (b) II and III only (c) I and III only (d) I, II and III ANSWER: (c)”