Viable mining for a Viksit Bharat

The mining sector supports approximately 12.5 million livelihoods, while the coal sector alone employs more than 2.5 million people. Mining not only powers industries; it powers Indian livelihoods. 

To ensure predictability and a unified regulatory environment for this foundational sector, the mining regulatory framework has undergone several significant changes over the years.

In this article, the focus is on the most recent amendment to the Mines and Minerals (Development and Regulation) Act, 1957, namely, the MMDR Amendment Act, 2026. Significantly, this amendment seeks to address and redress the grievance of the mining industry, which has been heavily burdened by multiple and exorbitant taxes levied over and above standard statutory mining levies.

Presently, the mining industry is already subjected to around 14 different taxes, charges, and fees, such as royalties, auction premiums, dead rent, DMF contributions, GST, and transit fees, etc. In addition to these, before the recent amendment, some States were additionally charging rates as high as 20 percent on the mineral-bearing lands.

By virtue of the judgment of the 9-Judge Bench of the Supreme Court in Mineral Area Development Authority v. Steel Authority of India (2024) 10 SCC 1 (MADA Case), the State’s powers to levy taxes over and above other mining levies were effectively restored. In doing so, the Court overruled its earlier precedent set by a 7-Judge Bench in India Cement Ltd. v. State of Tamil Nadu (1990) 1 SCC 12.

The conclusion of the 9-Judge Bench, inter alia, was based on the interpretation of List I Entry 54 and List II Entry 50 of the Seventh Schedule. The Court observed that since the Parliament had not imposed “any limitation” to the powers of States under the MMDR Act, the State legislature’s power to levy taxes on mineral rights remained “unaffected.".

However, the Court clarified that the Parliament in exercise of its power under List I Entry 54 of the Seventh Schedule can impose “any limitations” on the plenary power of the state legislature to levy taxes on mineral rights. The Court held that:

“255. The overall scheme of Article 246 read with List I Entry 54 and List II Entry 50 makes it clear that Parliament, in the interest of mineral development, can impose 'any limitations.' The purport of the expression “any limitations” is wide enough to include the imposition of restrictions, conditions, principles, as well as prohibition…”

The decision of MADA was applied with retrospective effect, i.e., from April 1, 2005 till July 25, 2024. Although such an application directly affected the financial and prospective aspects of the mining sector, the real impact was borne by end consumers due to increased raw material prices and production costs.

Such heavy retrospective applicability had a tendency to increase the costs of minerals due to two reasons: -

i)  Pending levies payable from period 2005 to 2024;

ii) Taxes, cesses and other levies on top of royalty after 25 July 2024 i.e., granting states a carte blanche to levy new taxes and levies.

This development allowed states to levy different types of taxes on mineral rights and mineral-bearing lands. Fragmented and unregulated levies that vary across different States steadily eroded the viability of mining operations and contributed to a rise in cost across the industry. It is pertinent to mention that Coal India Ltd, alone paid around 7,000 crores in FY 25-26 due to various state levies imposed on mineral rights and mineral-bearing lands.

India’s mineral resources lie in a few States, but they support the entire national economy, making their oversight a matter of national regulation. A unified national market cannot function under a fragmented tax regime where different states, according to their fiscal aspirations, levy multiple taxes under different names on mineral rights.

Crucially, minerals serve as foundational inputs for almost all core industrial and economic activities, including power generation, steel, cement, manufacturing, and infrastructure development. The ultimate burden of these compounding regional levies was inevitably passed down to the end consumers in the form of higher electricity tariffs, costlier housing, and more expensive goods and services, creating a severe bottleneck for the overall economic integration and uniformity.  

Moreover, different internal input costs across various mineral-dependent manufacturing industries undermine the envisaged “One Nation, One Market” framework. In such a case, domestic manufacturers end up spending more on basic raw materials than foreign competitors, making local manufacturing less competitive.

As mining operations demand predictability and uniformity, these State-level levies have deterred private investments and adversely impacted the sector’s growth. Furthermore, because mining projects demand massive, long-term capital commitments, unpredictable State-level tax variations severely alter expected returns. This risk shutting down entire mining operations and causing local job losses.

When Indian minerals cost more than imported ones, domestic industries start relying on foreign alternatives. Such reliance on foreign imports exposes India’s key sectors to international volatility and depletes foreign exchange reserves, despite the nation’s rich domestic geological deposits.

To bring more predictability, uniformity, and consistency, Parliament enacted the Mines and Minerals (Development and Regulation) Act, 2026. Consequently, the state governments cannot levy taxes on mineral rights and mineral-bearing lands except within the conditions prescribed by the Central Government.

It is pertinent to note that the State cannot recover any tax, cess, or any other levy on mineral rights or mineral-bearing lands which had not been recovered by the State before the commencement of the Amendment Act. Furthermore, any such levy already paid by mine operators cannot be recovered from the State.

All mining levies in the form of auction premiums, royalties, DMF, and NMET are solely appropriated by the State governments. The recent amendment to the MMDR Act, does not alter this position. Therefore, the States will continue to receive the overwhelming share of mining revenue. Further, the said amendment has no bearing on 50 minor minerals that are completely controlled by the State governments.

Ensuring uniformity and predictability in regulatory and taxation frameworks, alongside integrating the mining industry with broader national aspirations, is a fundamental prerequisite for the realization of the vision of a Viksit Bharat. The following table demonstrates how the 2026 Amendment actively advances this objective.

Moreover, the said amendment should not be viewed as detrimental to the revenue interests of the States. In the long term, attracting greater capital and the latest technology inherently serves the State’s broader interests by actively encouraging investments and technological advancements within the mining industry. In other words, stable and transparent mining regulations will benefit society at large by ensuring systematic and sustainable development.

Minerals are often seen as engines of economic development, with a prime example being the Gulf States, which have emerged as economic powerhouses by leveraging their vast oil reserves. Although India is not endowed with similar oil reserves, it possesses a diverse range of minerals that hold significant developmental potential.

However, to utilize these diverse mineral resources for the benefit of the nation, massive capital investment is necessary. Investors commit capital to any industry only when the tax structure is stable and predictable. Sudden change discourages long-term capital investments and slows down technological and infrastructural expansions.

As industry and investors inherently prefer stability and certainty, it is essential that commendable proactive steps like these are taken to ensure a regulatory environment that is stable, transparent, and commercially attractive. Ultimately, to instill confidence in investors and ensure that the flowers are not harmed in the process, a predictable and uniform tax structure would remain mandatory.

About the author: Naveen Kumar is an Advocate-On-Record, Supreme Court of India.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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