India’s Mining Bill: States Lose Tax Power to Miners

Parliament recently passed the Mines and Minerals (Development and Regulation) Amendment Bill 2026, a legislative move poised to redirect fiscal power within India’s mining sector. While its stated goal is to standardize mineral taxation and foster economic growth, critics argue the Bill centralizes authority and benefits private mining entities at the expense of mineral-rich states.

Legislative Action and its Critics

Authors Rahul Basu and Claude Alvares contend that the Bill’s true purpose is to bypass a significant Supreme Court ruling. This ruling, issued on July 25, 2024, had affirmed the constitutional right of states to impose taxes on mineral-bearing lands and rights.

• The Supreme Court judgment upheld states’ constitutional authority to levy taxes on mineral-bearing lands.
• It directed mining companies to pay substantial past tax liabilities to various states.

The new amendment effectively neutralizes this judicial precedent. It not only eliminates the states’ power to levy these specific taxes but also provides relief to companies from their previously mandated financial obligations.

• The Bill removes the taxing authority of states over mineral-bearing lands and rights.
• It absolves mining companies of past tax dues that the Supreme Court had directed them to pay.
• This legislative action, in effect, rewards entities for non-payment of previously upheld liabilities.

Contradicting National Policy and Precedent

This legislative shift appears to contradict the foundational principles outlined in the National Mineral Policy 2019. This policy designates natural resources as a “shared inheritance” and underscores the states’ crucial role as trustees.

• The National Mineral Policy 2019 emphasizes natural resources as a “shared inheritance.”
• It highlights the states’ responsibility as trustees to ensure future generations benefit from these resources.

The Centre’s justification citing tax uncertainty is also met with skepticism, as states possess strong economic incentives to avoid imposing levies that could harm their own economies. This is not the first instance of the central government employing the MMDR Act to centralize functions.

• A 2023 amendment to the MMDR Act previously allowed the Centre to auction state-owned mineral leases.

Federal Structure Under Strain

The constitutional validity of Parliament reallocating fiscal benefits in a manner that erodes India’s federal structure is now being questioned. Mineral-bearing states are urged to resist these perceived encroachments on their financial autonomy.

Instead of a unilateral “firmaan,” a more federalist solution, such as a collaborative meeting to address tax uncertainty as provided by the National Mineral Policy 2019, could have been pursued.