Mines, minerals bill gets nod, draws fire from Jharkhand, Kerala
Parliament passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2026, with the Lok Sabha clearing it first and the Rajya Sabha passing it the following day.
The Bill restricts state governments from imposing any tax, cess, or similar levy on mineral rights or mineral-bearing land except within conditions and restrictions prescribed by the Central Government.
The legislation retrospectively invalidates unpaid or unrecovered state levies of this kind from before the amendment's commencement, while levies already collected will not be refunded.
Jharkhand and Kerala raised objections, citing revenue implications running into an estimated Rs 1.5–2 lakh crore in potential retrospective dues and describing the move as an encroachment on states' constitutional taxation powers.
The Union Mines Ministry stated the amendment applies only to major minerals, leaves states' powers over minor minerals untouched, and is intended to ensure uniform mineral taxation rates nationally.
Constitutional Division of Mining Powers — Seventh Schedule Entries 54, 23, and 50
Mining and mineral taxation powers are split between the Union and States through specific entries in the Seventh Schedule, making this Bill fundamentally a question of legislative competence under Article 246.
Key Details
- Entry 54, Union List: empowers Parliament to regulate mines and mineral development "to the extent... declared by Parliament by law to be expedient in the public interest" — the basis for the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act).
- Entry 23, State List: gives states the power to regulate mines and mineral development, but only "subject to" Entry 54 — i.e., subject to any Union law occupying the field.
- Entry 50, State List: separately empowers states to levy "taxes on mineral rights," but this power is itself "subject to any limitations imposed by Parliament by law relating to mineral development."
- Article 246 governs the distribution of legislative powers between Parliament and state legislatures across the Union, State, and Concurrent Lists.
The 2026 Amendment Bill operates through Entry 50's "subject to limitations imposed by Parliament" clause, amending the MMDR Act, 1957 to prescribe conditions restricting how far states can tax mineral rights — the exact constitutional lever states argue is now being stretched too far.
Mineral Area Development Authority v. Steel Authority of India (2024) — the Judgment This Bill Responds To
A nine-judge Constitution Bench of the Supreme Court settled a decades-old dispute over whether "royalty" paid by mining lessees is a "tax," directly shaping the state revenue claims that this Bill now curtails.
Key Details
- Decided July 25, 2024, by an 8:1 majority, overruling the seven-judge bench ruling in India Cement Ltd. v. State of Tamil Nadu (1990), which had held royalty to be a tax and states incompetent to impose additional levies on mineral rights.
- The Court held royalty is a contractual consideration paid under mining lease conditions (under the MMDR Act), not a tax, and that states retain the power under Entries 49 and 50 of the State List to independently tax mineral rights and mineral-bearing lands.
- A related nine-judge ruling permitted states to raise demands for such taxes retrospectively from April 1, 2005, triggering claims by mineral-rich states — chiefly Jharkhand, Odisha, and West Bengal — against mining companies including Coal India and SAIL.
- Justice B.V. Nagarathna dissented, cautioning that allowing uncapped state taxation on minerals could destabilise the national mineral development framework.
The 2026 Amendment Bill is widely read as a legislative response to this judgment — by amending the MMDR Act to cap and condition state levies "by law," Parliament uses its Entry 50 power to narrow the very taxing space the Supreme Court had opened up for states in 2024.
Critical Minerals and the National Critical Mineral Mission (NCMM)
Beyond the federalism dispute, the amendment is also framed by the government as a measure to accelerate exploration of critical minerals essential to clean-energy and strategic technology supply chains, linking it to India's broader mineral security push.
Key Details
- The Union Cabinet approved the National Critical Mineral Mission in January 2025 with an outlay of Rs 34,300 crore over FY 2024-25 to FY 2030-31, targeting completion of 1,200 domestic exploration projects.
- India has identified a list of 30 critical minerals (including lithium, cobalt, graphite, rare earth elements, and nickel) vital for electronics, defence, and renewable-energy value chains.
- The MMDR (Amendment) Act, 2023 had earlier removed six atomic minerals (including lithium, titanium, and beryllium) from the list reserved exclusively for state-run entities, opening them to private-sector exploration and auction.
- The 2026 amendment is positioned as a follow-on reform to provide revenue and regulatory certainty for both existing lessees (Coal India, SAIL, and subsidiaries) and new private entrants exploring critical minerals.
Uniform, predictable mineral levies — the stated rationale for restricting state taxation — are presented by the Centre as necessary to sustain the investment climate the National Critical Mineral Mission depends on, even as mineral-rich states argue this comes at the cost of their fiscal federalism claims.
- Bill passed: Lok Sabha and Rajya Sabha, August 2026 (Lok Sabha first, Rajya Sabha the following day).
- Governing Act amended: Mines and Minerals (Development and Regulation) Act, 1957.
- Relevant Seventh Schedule entries: Entry 54 (Union List — mines and mineral development), Entry 23 (State List — regulation of mines, subject to Entry 54), Entry 50 (State List — taxes on mineral rights, subject to Parliament's limitations).
- MADA v. SAIL (2024): nine-judge bench, 8:1 majority, held royalty is not a tax; overruled India Cement v. State of Tamil Nadu (1990); permitted retrospective state tax demands from April 1, 2005.
- Estimated retrospective dues affected by the 2026 amendment: Rs 1.5–2 lakh crore (as per state government estimates).
- National Critical Mineral Mission: approved January 2025, outlay Rs 34,300 crore over seven years (2024-25 to 2030-31); India's critical minerals list covers 30 minerals.