Centre tightens grip over mineral taxation, states cry foul

- The union government takes control over mineral-bearing land, restricting states’ power to tax it. - Mining states like Jharkhand and Odisha fear revenue loss. However, the Centre says tax-sharing remains unchanged. - Opposition parties may challenge the bill in court. Experts suggest states may explore alternative levy sources. Among the 12 bills passed during the Monsoon Session of Parliament concluded in August, the Mines and Minerals (Development and Regulation) Amendment Bill, 2026 (MMDR Amendment Bill) has drawn the most opposition. The bill — which has far-reaching implications for Centre-State relations and the federal structure — was introduced in the Lok Sabha on August 10 and passed by a voice vote within two minutes on August 12. The statement of objects and reasons accompanying the Bill states that centre has assumed control over the regulation of mines and the development of minerals under Section 2 of the Mines and Minerals (Development and Regulation) Act, 1957, “in view of the larger public interest.” These amendments significantly alter the Mines and Minerals (Development and Regulation) Act, 1957, shifting authority over mineral-bearing land from states to the Union Government. States can no longer impose any tax, cess or levy on such land, whether based on mineral quantity, prices, royalty or any other basis, other than the terms or restrictions prescribed by the Centre. States had won this right to levy taxes following a 2024 Supreme Court ruling, which also ordered them to recover outstanding dues in 12 installments starting April 1, 2025. However, states will not be required to return the amounts already collected. Opposition parties allege that mining-rich states will suffer a revenue loss following the amendment to the MMDR Act. The Ministry of Mines maintains that the amendment will not eliminate any states’ rights over land and minerals, nor abolish state-collected mineral taxes. States currently receive approximately 14 types of taxes, charges, fees and other levies, including royalties, auction premiums, dead rent, payments to the District Mineral Foundation (DMF), Goods and Services Tax (GST) and transit fees. Karthik Bansal, associate fellow at the Centre for Social and Economic Progress (CSEP), said: “The existing system of tax sharing between the Centre and the states will continue, and there will be no changes to it. Most of the revenue from mining goes to the states. There will be no change in this arrangement.” However, Anurag Diwan, a retired additional director of the Mining Department in Chhattisgarh, told Mongabay-India that if the Centre has taken over the regulation of mineral-bearing land, states will no longer be able to impose any tax, cess or levy on mineral rights or mineral-bearing land on their own. A contentious issue The Rajya Sabha passed the bill by voice vote on the session’s final day amid a standoff. Nine members in the Rajya Sabha — including Member of Parliament (MP) from Dravida Munnetra Kazhagam (DMK) from Tamil Nadu, Tiruchi Siva — demanded that the bill be referred to a Select Committee for a comprehensive discussion, but the House rejected the proposal. Speaking to Mongabay-India, Jharkhand Mukti Morcha Rajya Sabha member Mahua Maji accused the central government of introducing the bill in haste. She said, “Discussions on bills usually take place from 2 PM onwards. However, Question Hour and Zero Hour were suspended to push this bill through. At the time, the Opposition was protesting over several issues. The government quietly brought in this bill, and only a handful of MPs got the opportunity to speak.” N.K. Premachandran, the Revolutionary Socialist Party MP from Kerala who was the first to raise his voice against the amendments in the Lok Sabha, expressed apprehension in a conversation with Mongabay-India, saying that the central government might now take over the task of granting mining leases. This function currently rests with state governments. The taxation of mineral-bearing land has been a contentious issue from the very beginning. In the India Cement Ltd. v. State of Tamil Nadu case, a seven-judge bench of the Supreme Court ruled in favour of India Cements in 1989, stating that the power to regulate mines and minerals under the law rests with the Centre. The Supreme Court constituted a nine-judge Constitution Bench to hear over 80 petitions challenging the earlier ruling; in its 2024 order, the Bench held that treating royalty as tax in the previous judgment was “wrongly decided.” In its latest judgement on the issue, the Supreme Court held that “land” under Entry 49 of List II (States’ power to levy taxes on lands and buildings) includes land bearing minerals. The central government introduced this amendment two years after the Supreme Court’s Constitution Bench delivered that order in 2024 with an 8-1 majority. Bansal says that with the 2026 amendments, the central government has disregarded the Supreme Court’s ruling, as the passage of this bill sets a bad precedent. “Whenever the Centre feels that states should not possess a certain power, it can strip them of that authority by passing a law in Parliament. This does not bode well for the future,” he told Mongabay-India. Following this, states have claimed significant revenue losses. Regarding Jharkhand’s outstanding dues, State Finance Minister Radha Krishna Kishore, while speaking to Mongabay-India, said the state would incur a loss of ₹1.36 trillion. According to the Biju Janata Dal, the opposition party in Odisha, the state could incur a loss of approximately ₹1 trillion in past dues. However, according to Coal and Mines Minister G. Kishan Reddy, the Mines and Minerals (Development and Regulation) Amendment Bill, 2026, has been introduced to bring uniformity, predictability and fiscal stability to the mineral taxation regime. Incidentally, in its 2024 judgement, the Constitution Bench observed: “…mineral-rich states such as Jharkhand, Chhattisgarh, and Orissa have lower per capita incomes than the national averages. 67 Taxation is among the important sources of revenue for these States, impacting their ability to deliver welfare schemes and services to the people.” Chinmayi Shalya, senior fellow, energy transition at the Swaniti Initiative, told Mongabay-India, “States are responsible for land, environment and communities and the impacts are felt on the ground and have to be borne by people who the state government governs. The decision to centralise can potentially impact the fund pool unless careful attention is paid. Additionally, it will be crucial not to erode the subnational autonomy around extraction and coordination between centre and state.” State and revenue Following a Supreme Court order, states such as Jharkhand and Tamil Nadu enacted laws to levy a cess on minerals. Now, these laws are in limbo. Meanwhile, Odisha imposes a rural infrastructure and socio-economic development cess. Chhattisgarh also levies an environment and infrastructure development cess on mining. The share of mining (royalties, cesses, dead rent and others) in the non-tax revenue of mineral-rich Jharkhand rose from 71.9% in 2018-19 to 84.9% in 2024-25 (actuals). Mining revenue for the year 2025-26 is estimated at ₹219 billion, which constitutes 84.7% of the state’s total estimated non-tax revenue of ₹258.6 billion.” The state is expected to generate over ₹130 billion in the 2026-27 financial year by levying a cess on mineral-bearing land. Jharkhand Chief Minister Hemant Soren claimed that these funds are utilised for social welfare schemes such as Maiya Samman and Birsa Awas. Jharkhand Finance Minister Kishore said: “We have suffered a loss of ₹40 billion due to the rationalisation of GST by the central government. We will also incur a loss of ₹40 billion as our share increases from 10% to 40% following the implementation of the VB-G RAM G (Viksit Bharat – Guarantee for Rozgar & Ajeevika Mission (Gramin)). Now, amendments to mining laws will result in a loss of ₹140 billion. Thus, our total loss stands at ₹220 billion, which is nearly one-fourth of our total revenue.” For the mineral-rich neighbouring state of Odisha, mineral royalties account for more than three-quarters of its non-tax revenue (₹600 billion). Meanwhile, Chhattisgarh is projected to earn ₹150 billion in mineral revenue in 2026–27. However, the central government continued to highlight growth in states’ mining revenue. The Minister of mining, in his consecutive posts on social media platform X, claimed that Jharkhand and Odisha’s mining revenue has grown by 618% and 1,051%, respectively, in the last 11 years. The Ministry of Mines stated that mineral-rich states, in the last decade between 2015-16 and 2025-26, have received a total of over ₹5 trillion, while the Centre’s revenue stood at merely ₹820 billion. Centre argued, “Unbalanced imposition of steep taxes will prompt the industry to rely on imported minerals, thereby putting a heavy burden on the exchequer.” However, Diwan suggests creating a GST-like system by consolidating all taxes, cesses and levies to ensure better coordination between the Centre and the states regarding minerals. He argues that this would make India’s mineral sector competitive by establishing uniform prices across the country, thereby benefiting industries and eliminating the need for mineral imports. Experts say these amendments will not currently affect the District Mineral Foundation Trust (DMFT) fund, which is designed for the welfare of local people in mining areas. DMFT fund is linked to royalties. However, an expert familiar with the mining sector told Mongabay-India, on condition of anonymity, that the Center will now determine the royalty rates in accordance with the changes introduced by the MMDR Amendment Bill. Earlier, states were determining these rates. It could impact the DMFT, the expert said. Tough road ahead Following the passage of this bill, several states are prepared to challenge the amendments in the Supreme Court. Along with Congress-ruled states, Jharkhand has also announced its decision to challenge this move in the apex court. The Chief Ministers of Jharkhand, Kerala and Tamil Nadu have written to the Prime Minister, urging the withdrawal of these amendments. Meanwhile, Karnataka’s Deputy Chief Minister Dr. G. Parameshwara has also written to the Prime Minister, demanding the withdrawal of the amendments and calling for consultations with all states on this issue within a stipulated timeframe. In Odisha, Leader of the Opposition Naveen Patnaik wrote a letter to Chief Minister Mohan Charan Majhi, alleging that this bill directly undermines a crucial foundation of Centre-state relations. Opposition to this issue has now emerged from within the NDA itself. Sudesh Mahto, chief of the All Jharkhand Students Union (AJSU) party — an NDA ally — stated in a letter to Coal and Mines Minister G. Kishan Reddy that any decision taken against the people of Jharkhand would be unacceptable to them, and that the state should be permitted to levy a cess on mineral-bearing land. Bansal says, “If the states accept the amendments, then this solution will work. If the states approach the Supreme Court, the court will likely suspend the amendments for the time being.” According to experts, if states wish, they can compensate for their losses by levying taxes through other means. Diwan adds, “States have the option to levy a cess on all types of land rather than on the minerals themselves, with the cess rate based on the activities being carried out on that land, since the amendment to the law pertains to mineral-bearing land.” However, he adds that states should proceed with this only after preparing a robust draft and consulting their law departments. Bansal also concurs with Diwan’s views, saying, “If the state is barred from levying taxes or other charges on land, the state government might increase other costs to avoid a revenue loss. Thus, these amendments are not the solution; states could resort to other measures. The Centre and the states need to work together to find a solution.” Banner image: A coal block in Hasdeo. Even today, approximately 75% of India’s total energy consumption is met by coal-based thermal power plants. Image by Alok Prakash Putul/Mongabay. This story was reported by Mongabay-India’s Hindi team and first published here on our Hindi site on September 2, 2026.