Simpler mining tax model can mean more revenue for states

Why in the News

The chairperson of the Economic Advisory Council to the Prime Minister, argues that the recently passed Mines and Minerals (Development and Regulation) Amendment Act, 2026 replaces a fragmented mineral taxation system, up to 14 different taxes, charges, fees and levies across States, with a simpler, uniform and predictable framework, extending the certainty-over-discretion principle already applied to mineral block allocation in 2015 to mineral taxation itself.

What does the amended Act change, and what does it retain?

1. It targets fiscal fragmentation across States: The amendment addresses a landscape where mineral producers face up to 14 types of taxes, charges, fees and levies that differ by State, and aims to keep India’s mineral market integrated rather than fractured along State fiscal lines.
2. The revenue-sharing formula with States is retained, not altered: Since the e-auction regime began in 2015, States have received more than Rs 7 lakh crore, about 90% of total revenue from the coal and non-coal sectors combined, through royalty, auction premium, District Mineral Foundation (DMF) contributions and GST; the amendment continues this formula, with 90 paise of every rupee earned from mineral production retained by the State.
3. The reform is framed as continuing a 12-year trajectory: The op-ed traces the shift from a pre-2014 system of discretionary block allotment, marked by delay and opacity, to transparent competitive e-auctions, arguing that the new tax simplification extends the same certainty principle to fiscal treatment of mining.

Conclusion

The op-ed’s position is that a simpler, uniform mineral tax framework under the amended MMDR Act protects mineral-rich States’ own revenue pool while removing the fiscal fragmentation that has made India’s mineral market uncompetitive against import sources, an argument resting on the Act’s own revenue-sharing data rather than a general case for lower taxation.

Back2Basics

1. Mines and Minerals (Development and Regulation) Act, 1957: The principal central legislation governing regulation of mines and mineral development in India, under which State governments grant mineral concessions but the Centre sets the overarching regulatory and taxation framework.
2. District Mineral Foundation (DMF): A non-profit trust set up in mining-affected districts under the Act to work for the interest and benefit of persons and areas affected by mining-related operations, funded through a share of royalty payments.

“[2025, GS2, 15 marks] Examine the evolving pattern of Centre-State financial relations in the context of planned development in India. How far have the recent reforms impacted the fiscal federalism in India?”