Kerala to oppose Centre's MMDR Act amendments restricting state powers on mineral taxes
The Kerala state government announced it will formally register its opposition to the Mines and Minerals (Development and Regulation) Amendment Bill, 2026, and examine legal remedies against it
The state's objection centres on the new Section 9D, which restricts states from levying taxes, cess, or other levies on mineral rights and mineral-bearing land except as permitted by the Central Government
The state government argues the amendment encroaches on states' constitutional authority over land, which falls under Entry 18 of the State List (Seventh Schedule), and will cause revenue loss to mineral-rich states
The objection frames the amendment as inconsistent with a 2024 Supreme Court ruling that had upheld states' power to tax mineral rights and mineral-bearing land
Entry 18, State List — "Land" as a State Subject
Entry 18 of the State List (Seventh Schedule) gives states legislative and taxing authority over "land," including rights in or over land, land tenures, and land revenue. It is one of the core subjects reserved to the states under India's quasi-federal structure, alongside Entry 49 (taxes on lands and buildings) and Entry 50 (taxes on mineral rights).
Key Details
- Entry 18 covers land generally; Entry 49 specifically covers taxation of land and buildings; Entry 50 specifically covers taxation of mineral rights — a state's mineral-tax argument typically invokes Entry 49 and/or Entry 50 rather than Entry 18 directly, since Entry 18 is a general land-administration entry rather than a taxation entry
- Unlike Entry 50, Entry 18 is not textually qualified by "subject to limitations imposed by Parliament," which is why states frame land ownership and control as a more absolute state domain than mineral taxation
- The MMDR Act, 1957, enacted under Union List Entry 54, has long been argued by states to encroach on Entry 18/23 State List domains where mineral-bearing land is concerned
By characterising Section 9D as reaching into land control (Entry 18) rather than only mineral-rights taxation (Entry 50), the state's objection seeks to place the amendment on weaker constitutional footing, since Entry 18 lacks Entry 50's built-in "subject to Parliament" qualifier.
Fiscal Federalism and State Revenue Autonomy
Indian fiscal federalism divides tax powers between the Union and states under Article 246 read with the Seventh Schedule, with states historically dependent on Finance Commission devolution, GST compensation, and their own tax handles (including mineral royalty-linked levies) for revenue. Mineral-rich states such as Odisha, Jharkhand, Chhattisgarh, and Kerala's coastal mineral-sand belt have relied on mineral-linked cesses as a own-revenue source distinct from central transfers.
Key Details
- The 16th Finance Commission (constituted to recommend devolution for 2026-31) is the current body determining the vertical (Centre-state) and horizontal (inter-state) share of the divisible tax pool
- States' "own tax revenue" (as opposed to devolved central transfers) includes land revenue, mineral-rights taxes, and cesses — categories directly affected by Section 9D
- The District Mineral Foundation (Section 9B, MMDR Act, inserted 2015) already channels a share of royalty toward mining-affected areas; state-level mineral cesses under Entry 50 are a separate, additional revenue stream now capped by Section 9D
The state's revenue-loss argument rests on Section 9D removing an existing own-revenue stream (state mineral levies) without a corresponding increase in devolved transfers, which is the standard fiscal-federalism objection raised whenever the Centre narrows a state tax handle.
Federalism as a Constitutional Principle — Basic Structure and Centre-State Disputes
Federalism has been recognised by the Supreme Court as part of the "basic structure" of the Constitution (from Kesavananda Bharati v. State of Kerala, 1973, onward), meaning it constrains even constitutional amendments, though ordinary legislation enacted within Parliament's assigned entries is not automatically a basic-structure violation merely because a state disagrees with it. Centre-state disputes over legislative competence are constitutionally resolved either through litigation under Article 131 (Supreme Court's original jurisdiction in Centre-state disputes) or through ordinary judicial review.
Key Details
- Article 131 gives the Supreme Court exclusive original jurisdiction over disputes between the Government of India and one or more states, or between states — the forum a state would use to directly challenge a central law as unconstitutional
- A state can also challenge a central law through ordinary writ jurisdiction (Article 226 in a High Court, or Article 32 in the Supreme Court) if it affects fundamental rights, though states themselves cannot invoke Article 32 as they are not "persons"
- Prior instances of states challenging central legislation on federalism grounds include challenges to the National Judicial Appointments Commission Act and various states' challenges to farm laws and CAA-linked legislation
The state's stated intent to "explore legal remedies" points toward a potential Article 131 suit or writ challenge questioning whether Section 9D's restriction on Entry 50 taxing power is a valid "limitation imposed by Parliament" or an impermissible removal of the state's constitutional tax base altogether.
- Constitutional entry at the centre of the dispute: Section 9D restricts taxation under State List Entry 50 (tax on mineral rights); states also invoke Entry 18 (land) and Entry 49 (tax on land and buildings)
- Forum for direct Centre-state constitutional disputes: Article 131 (Supreme Court's exclusive original jurisdiction)
- District Mineral Foundation: created by Section 9B of the MMDR Act via the 2015 amendment, funded by a share of royalty, for welfare of mining-affected areas
- 2024 Supreme Court ruling the state cites: Mineral Area Development Authority v. Steel Authority of India, 9-judge bench, 8:1 majority (July 25, 2024), upholding states' power to tax mineral rights (Entry 50) and mineral-bearing land (Entry 49)
- Basic structure doctrine (including federalism as a basic feature): established in Kesavananda Bharati v. State of Kerala (1973)
- 16th Finance Commission: constituted to recommend Centre-state devolution formula for the period beginning 2026