Pinarayi backs Satheesan’s stand against mining law, suspects move to privatise Kerala’s mining PSU
Objections have been raised in Kerala against the Union government's Mines and Minerals (Development and Regulation) Amendment Bill, 2026, which restricts states from imposing additional taxes, cesses, or levies on mineral rights and mineral-bearing land.
The bill inserts a new provision barring states from taxing mineral rights based on mineral quantity, mineral value, or royalty payable, except within conditions prescribed by the Union government.
The bill also seeks to invalidate past state-imposed levies on mineral rights that had not yet been deposited or recovered before the amendment, while levies already collected need not be refunded.
Concerns have been raised that the resulting fiscal squeeze could push state-owned mineral undertakings, including Kerala's state mining public sector unit, toward privatisation or loss of viability.
The legislative response has been widely read as an attempt to override the effect of a 2024 Supreme Court ruling that had expanded states' taxation powers over minerals.
The MMDR Act, 1957 and the New Section 9D
The Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) is the principal Union legislation governing mineral exploration, mining leases, and royalty in India, enacted under Entry 54 of the Union List (regulation of mines and mineral development declared expedient in the public interest by Parliament). The 2026 Amendment Bill inserts Section 9D, which bars state governments from imposing any tax, cess, or levy on mineral rights or mineral-bearing land linked to mineral quantity, mineral value, or royalty, except as permitted by Union-prescribed conditions.
Key Details
- MMDR Act, 1957 was enacted under Entry 54, List I (Union List) — mines and mineral development "to the extent regulation and development is declared by Parliament by law to be expedient in the public interest."
- Section 9 of the MMDR Act deals with royalty payable by lessees to state governments on minerals removed.
- The 2026 amendment additionally seeks to nullify state levies imposed before the amendment's commencement that had not yet been deposited or recovered, while permitting states to retain levies already collected.
- Mineral resources are otherwise a State List subject under Entries 23 (regulation of mines subject to Union control) and 50 (taxes on mineral rights subject to any limitations imposed by Parliament).
The new Section 9D directly targets the taxing power that the Supreme Court had affirmed lies with states, restricting mineral-rich states like Kerala from levying cess/taxes on mining PSUs and private lessees over and above royalty.
Mineral Area Development Authority v. Steel Authority of India (2024)
This nine-judge Constitution Bench judgment of the Supreme Court settled a decades-long dispute on whether royalty paid under the MMDR Act is a "tax," and whether states retain independent power to tax mineral rights and mineral-bearing lands.
Key Details
- Decided 25 July 2024 by an 8:1 majority (Chief Justice-led nine-judge bench; Justice B.V. Nagarathna dissenting).
- Held that royalty payable under the MMDR Act is NOT a tax, and that states have the constitutional competence to tax mineral rights under Entry 50 of the State List and mineral-bearing lands under Entry 49 of the State List, subject to any limitations Parliament may impose under Entry 50.
- The Court ruled Parliament's MMDR Act does not, by itself, limit states' taxing power under Entry 50 unless Parliament expressly does so.
- The Court also directed that past dues be recovered in a staggered manner (instalments spread over roughly twelve years from April 2026) and barred interest/penalty on dues predating the judgment.
The 2026 MMDR Amendment Bill is widely understood as Parliament now exercising the very limiting power on Entry 50 that the 2024 judgment said it could exercise — directly reducing the taxing space the Court had opened up for states, which is the crux of the state-level objection.
Fiscal Federalism and the Union-State Distribution of Taxing Powers
Federalism in India's fiscal architecture is structured through the Seventh Schedule's distribution of taxation entries between the Union List, State List, and the residual/limiting mechanisms Parliament may invoke over otherwise state-held powers (as with Entry 50).
Key Details
- Entries 49 and 50 of the State List (taxes on lands/buildings, and taxes on mineral rights respectively) are among the few remaining independent state taxation powers after GST subsumed most indirect taxes.
- Article 246 read with the Seventh Schedule governs the distribution of legislative powers between Union and states; residuary powers rest with the Union (Article 248, Entry 97 Union List).
- Mineral revenue (royalty plus any state cess) is a significant non-tax/tax revenue source for mineral-rich states such as Odisha, Jharkhand, Chhattisgarh, and Kerala (for beach-sand/rare-earth minerals).
Curtailing state cess powers over minerals is being framed by mineral-rich states as an erosion of one of the few independent fiscal levers left to them, with direct implications for the revenue and viability of state mining undertakings.
State Mining Public Sector Undertakings
State-owned mineral corporations undertake mining, processing and marketing of minerals located within a state and depend on both royalty-sharing and any state-level cess/levy revenue for financial sustainability.
Key Details
- Kerala Minerals and Metals Limited (KMML) is a Kerala government-owned enterprise engaged in mining and processing beach-sand minerals (ilmenite, rutile, monazite) along the Chavara coast, a globally significant placer mineral deposit.
- Monazite, a thorium-bearing mineral found in Kerala's beach sands, is classified as a "prescribed substance" under the Atomic Energy Act, 1962, giving the Union government (via the Department of Atomic Energy) a special regulatory role in addition to the MMDR Act framework.
- State mining PSUs' revenues typically combine ore sale proceeds, royalty-sharing arrangements, and (where permitted) state cess on mineral rights.
Restricting a state's power to levy cess on mineral rights removes a revenue stream that could otherwise support a financially stressed state mining PSU, feeding concerns that reduced state control creates conditions favourable to private/central takeover of processing contracts.
- MADA v. SAIL: decided 25 July 2024, 9-judge bench, 8:1 majority, royalty held not to be a tax.
- MMDR Act enacted under Entry 54, Union List; mineral rights taxation is Entry 50, State List.
- MMDR Amendment Bill, 2026 inserts Section 9D restricting state cess/tax on mineral rights and mineral-bearing land.
- Supreme Court directed past dues recovery staggered over roughly 12 years from 1 April 2026, with no interest/penalty on pre-judgment dues.
- KMML mines and processes beach-sand minerals (ilmenite, rutile, monazite) from Kerala's Chavara belt; monazite is a regulated "prescribed substance" under the Atomic Energy Act, 1962.