Yet to assess impact of mines Act on Odisha, says Minister as legislators flag potential loss
A state minister told the Odisha Assembly that the government has yet to formally assess the impact of recent central amendments to mining law on the state's finances, even as legislators flagged a potential revenue loss
The Mines and Minerals (Development and Regulation) Amendment Act, 2026 restricts state governments' power to impose taxes, cess and other levies on mineral rights and mineral-bearing land
The amendment follows a 2024 Supreme Court ruling that had upheld states' constitutional power to tax mineral rights, and curbs much of the fiscal room that ruling had opened up
Legislators raised concerns in the Assembly that the changes could substantially reduce Odisha's non-tax revenue, given mining's outsized share of the state's own revenue base
Mineral Area Development Authority v. Steel Authority of India (2024) — States' Power to Tax Mineral Rights
In July 2024, a nine-judge Constitution Bench of the Supreme Court, by an 8:1 majority, held that royalty payable on mineral rights is not a tax, and that state legislatures have the constitutional competence to impose taxes on mineral rights and mineral-bearing land under Entries 49 and 50 of the State List. The judgment overruled the seven-judge bench ruling in India Cement Ltd. v. State of Tamil Nadu (1989), which had treated royalty as a tax and held it beyond state legislative competence.
Key Details
- Decided 25 July 2024 by a 9-judge bench headed by then Chief Justice D.Y. Chandrachud; Justice B.V. Nagarathna dissented
- Overruled India Cement Ltd. v. State of Tamil Nadu (1989), a 7-judge bench ruling
- In a subsequent order (14 August 2024), the majority held the ruling would apply retrospectively, allowing states to raise past tax/cess demands back to 1 April 2005
- The ruling significantly expanded mineral-rich states' potential non-tax revenue base immediately prior to the 2026 amendment
The MADA judgment is the direct backdrop to this news — it is the source of the state taxation powers over minerals that the 2026 amendment now substantially restricts.
MMDR (Amendment) Act, 2026 — Section 9D and the Centralisation of Mineral Taxation
The Mines and Minerals (Development and Regulation) Amendment Act, 2026 inserts a new Section 9D into the parent 1957 Act, barring state governments from imposing any tax, cess or other levy on mineral rights or mineral-bearing land — whether based on mineral quantity, value or royalty — except within conditions the Central Government chooses to prescribe.
Key Details
- Passed by the Lok Sabha on 12 August 2026 and the Rajya Sabha on 13 August 2026; received Presidential assent on 17 August 2026
- New Section 9D: states cannot levy tax/cess on mineral rights or mineral-bearing land except as permitted under Central Government conditions
- A corresponding new clause, Section 13(ta), empowers the Central Government to frame rules prescribing these conditions and restrictions
- Unpaid or unrecovered past state dues arising from earlier levies are deemed invalid under the amendment, though amounts already collected by states are not required to be refunded
Section 9D is the specific provision legislators in Odisha are citing as the source of the state's potential revenue loss, since it overrides much of the taxation room the MADA judgment had opened for the state just two years earlier.
Constitutional Distribution of Power over Mines and Minerals (Seventh Schedule)
The Constitution splits legislative competence over mines and minerals across the Union and State Lists in a way that subordinates state power to Parliament's declared policy. Entry 54 of the Union List gives Parliament power over "regulation of mines and mineral development" to the extent Parliament declares such regulation "expedient in the public interest." Entry 23 of the State List allows states to regulate mines "subject to the provisions of List I." Entry 50 of the State List allows states to tax mineral rights, but only "subject to any limitations imposed by Parliament by law relating to mineral development."
Key Details
- Union List Entry 54: regulation of mines and mineral development, to the extent Parliament declares it expedient in the public interest — exercised via the Mines and Minerals (Development and Regulation) Act, 1957
- State List Entry 23: state power to regulate mines, explicitly "subject to" Entry 54 (i.e., subordinate to Parliament's declared policy)
- State List Entry 50: state power to tax mineral rights, explicitly "subject to any limitations imposed by Parliament by law relating to mineral development"
- Because the MMDR Act, 1957 is itself the "law relating to mineral development," Parliament can amend that very Act (as it did via Section 9D in 2026) to restrict the taxation power that Entry 50 otherwise gives states
This "subject to" architecture is the constitutional mechanism that allows a parliamentary amendment to substantially narrow a taxation power the Supreme Court had just confirmed belongs to the states — the doctrinal reason Odisha's fiscal room can be curtailed by an ordinary central amendment rather than a constitutional amendment.
Fiscal Federalism and Non-Tax Revenue Dependence of Mineral-Rich States
Mineral-rich states such as Odisha, Jharkhand and Chhattisgarh rely on mining-linked levies (royalty, cess and mineral-area taxes) for an unusually large share of their own non-tax revenue, making them more exposed than most states to changes in the Centre-state mineral taxation balance. A separate but related mechanism, the District Mineral Foundation (DMF), channels part of mining proceeds to the welfare of mining-affected local areas, distinct from the general state cess now restricted under Section 9D.
Key Details
- Odisha's mining tax revenue was projected at around Rs 53,000 crore for 2026-27, reported to account for roughly 75% of the state's non-tax revenue [Unverified]
- District Mineral Foundations (DMFs) were established under Section 9B, inserted into the MMDR Act, 1957 by a 2015 amendment, funded through an additional levy over and above royalty, for the welfare of persons and areas affected by mining
- DMF collections are a separate revenue stream from the general state mineral taxes/cess restricted by the new Section 9D
- The Finance Commission's assessment of states' revenue capacity factors in such own non-tax revenue streams, meaning a sustained reduction in mineral-linked state revenue can also affect a state's relative fiscal position in Finance Commission devolution formulas
This dependence is why Odisha's legislators, more than those of most states, are flagging the 2026 amendment's revenue impact — mining is disproportionately large in the state's own revenue base compared to other sources.
- MADA v. Steel Authority of India: 9-judge bench, 8:1 majority (Nagarathna J. dissenting), decided 25 July 2024; overruled India Cement Ltd. v. State of Tamil Nadu (1989)
- Retrospective cut-off for past dues under MADA: 1 April 2005 (clarified in the Court's order of 14 August 2024)
- MMDR (Amendment) Act, 2026: passed Lok Sabha 12 August 2026, Rajya Sabha 13 August 2026, Presidential assent 17 August 2026
- Key new provision: Section 9D (bars state tax/cess/levy on mineral rights or mineral-bearing land beyond Centre-prescribed conditions); Section 13(ta) empowers the Centre to frame those conditions
- Relevant constitutional entries: Union List Entry 54; State List Entries 23 and 50 (Seventh Schedule)
- Odisha's projected mining tax revenue, 2026-27: approximately Rs 53,000 crore, reported at about 75% of the state's non-tax revenue [Unverified]
- District Mineral Foundation (DMF): established via Section 9B, inserted by a 2015 amendment to the MMDR Act, 1957