Mining amendment is unfair to States 

Why in news?

 The Mines and Minerals (Development and Regulation) Amendment Act, 2026 amends this Act to establish a uniform and balanced fiscal framework for the sector. However, there remain concerns around erosion of the state’s fiscal autonomy.

UPSC Relevance

Prelims – latest provisions

Mains, GS1, Distribution of Key Natural Resources across the world (including South Asia and the Indian sub-continent)

GS2, Issues and Challenges Pertaining to the Federal Structure

GS3, Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

The Mines and Minerals (Development and Regulation) Amendment Act, 2026

India’s mineral wealth lies in a few States but supports the entire national economy, making its taxation a question of national importance. 

Mining in India is regulated under the Mines and Minerals (Development and Regulation) Act, 1957. The Mines and Minerals (Development and Regulation) Amendment Act, 2026 amends this Act to establish a uniform and balanced fiscal framework for the sector. 

Major amendments :- 

The Act makes focused amendments to the MMDR Act, 1957. Its key provisions are as follows:

• New Section 9D — limits on State levies: No tax, cess or other levy, by whatever name called, shall be imposed by a State Government on mineral rights or mineral-bearing lands. This covers levies based on mineral quantity, mineral value, royalty or any other basis. Such levies may be imposed only as per conditions or restrictions prescribed by the Central Government.
• Treatment of past levies: Any levy not paid or collected by the State before the amendment applies will be treated as invalid. However, amounts already deposited or recovered before such commencement shall not be liable to be refunded.
• Rule-making power under Section 13: Section 13 of the MMDR Act is amended to empower the Central Government to make rules. These rules will prescribe the conditions or restrictions for imposition of such levies by State Governments.

The Need for Reform – create a predictable tax framework

• Promote Long-Term Investment – Investors commit capital to mining only where the tax structure is stable and foreseeable. Sudden changes discourage such commitment and slow technological and infrastructural expansion. A stable regime under the Act is intended to secure that confidence.
• Prevent Multiplicity of Levies – States currently impose around 14 taxes, charges and fees on mining like royalty, auction premium, GST and transit fee. Some States have additionally begun taxing mineral-bearing lands, at rates as high as 20 %. The Act addresses this cumulative and open-ended burden on the sector.
  • High levies extend even to critical minerals such as graphite and atomic minerals such as uranium making the extraction of these strategic minerals uneconomical.
• Dual Burden on Foreign Exchange – When Indian minerals cost more than imported ones, user industries such as steel source cheaper raw material from abroad. At the same time, costly domestic minerals lose ground in export markets. Curbing this cost escalation is essential to the Atmanirbhar goal in the mineral sector.
• Fragmentation of the National Mineral Market – Widely differing State levies cause mineral costs to vary sharply across regions which obstructs supply chains and pushes up transport and logistics costs. 
• The Cost Ultimately Reaches the Household – A levy at the mining stage is added directly to the mineral’s price. It then passes through steel, cement, electricity and construction. Ordinary families finally pay more for housing, power and essential goods. 
• Threat to Employment, Including in Tribal Areas – The coal sector employs over 5 lakh people directly and indirectly while the non-coal sector supports more than 1 crore workers. High levies have already forced some mines to close and left other projects unopened. Small and medium operators work on thin margins and shut down first, taking local jobs with them.
• Mining Viability is Central to Energy Security – Growing global uncertainty makes a resilient domestic mining sector essential. The coal sector is simultaneously being made more competitive and technologically advanced to reduce import dependence. A viable and predictable tax regime is a precondition for both.

Concerns arising with Section 9D

• Erosion of Fiscal Autonomy: Section 9D makes future State taxes and levies on minerals dependent on a framework controlled by the Central Government. This restricts the financial self-reliance of mineral-rich States whose budgets depend heavily on mining revenues to fund regional development.
  • States like Odisha rely heavily on mining for non-tax revenue; constraining their tax flexibility undermines fiscal self-reliance brought out in NITI Aayog’s Fiscal Health Index where they had performed better.
• Disproportionate Externalities vs. Revenue: While the Centre emphasizes that 90% of sector revenue accrues to States and will continue to do so, the amendment prevents States from adjusting local levies in the future. States carry the heavy, long-term costs of mineral extraction—such as environmental damage, population displacement, and heavy public infrastructure wear—without having flexible taxation mechanisms to cover them.
• Constitutional Overreach (Entry 49 & Entry 50): Entry 50 of the State List allows Parliament to impose limitations on State power to tax mineral rights, but Entry 49 grants States exclusive legislative power over land taxation. Extending central restrictions to taxes on ‘mineral-bearing land’ raises constitutional concerns over whether a federal mining law can restrict a State’s exclusive land-taxing authority.
• Undermining Judicial Precedents: In 2024, a nine-judge Supreme Court bench (Mineral Area Development Authority vs. Steel Authority of India) ruled that royalties are not taxes, affirmed States’ legislative power to tax mineral rights, and recognized their authority over mineral-bearing lands. The 2026 amendment risks bypassing and rendering this landmark ruling ineffective.
• Predictability at the Expense of Federal Balance: While the Centre argues the rule creates a stable, predictable tax environment to attract long-term private investment, critics argue this uniformity narrows fiscal federalism by decoupling a State’s natural economic advantages from its governance capacity.

The Mines and Minerals (Development and Regulation) Amendment Act, 2026 marks an important step in modernising India’s mineral governance. However, the state’s already eroding fiscal capacity must be considered for ensuring a truly sustainable and viable mining ecosystem.

Other major provisions of the MMDR Act, 1957

• Auction-Based Resource Allocation (Section 10B & 11): Mandatory competitive e-auctions for granting mining leases and composite licenses to eliminate discretionary allocations and ensure fair price discovery.
• Unified Concession Types:
  • Composite Licence [Section 3(a)]: A single, seamless two-stage concession combining prospecting and subsequent mining operations.
  • Exploration Licence (Section 10BA): Granted through competitive auction to promote private-sector participation in deep-seated and critical mineral reconnaissance and prospecting.
• District Mineral Foundation (DMF) [Section 9B]: Established as a non-profit trust in mining-affected districts, funded by a statutory contribution (up to one-third of royalties) paid by leaseholders to support local socio-economic welfare and infrastructure.
• National Mineral Exploration and Development Trust (NMEDT) [Section 9C]: Funded by an additional 3% of royalty paid by lessees to support regional exploration, airborne surveys, and deep-seated mineral research.
• Removal of End-Use Reservations: The distinction between captive and merchant (non-captive) mines for future allocations has been abolished. All future mineral blocks are auctioned without end-use restrictions, effectively standardizing them as commercial/merchant blocks.
• Cap on Captive Restrictions: Existing Captive mine operators are permitted to sell up to 50% of their annual mineral production in the open market after satisfying the end-use requirement of their linked plants.
• Lapsing & Transfer of Clearances (Section 4A & 8B): Statutory clearances (environmental and forest approvals) automatically transfer to successful new auction bidders. Mining leases lapse if production fails to commence within two continuous years.

List of Minerals Under First Schedule 

The First Schedule of the MMDR Act categorizes minerals requiring specific Union oversight, Central approvals, or special auction mechanisms:

Part A: Hydrocarbon / Energy Minerals – Minerals related to fossil-fuel energy generation:

• Coal
• Lignite

Part B: Atomic Minerals – Strategic elements regulated under strict government domain:

1. Uranium-bearing minerals
2. Thorium-bearing minerals (e.g., Monazite)
3. Rare metals containing Caesium, Rubidium, and Lithium (if occurring in atomic grade)
4. Pitchblende and other radioactive ores (Note: Six key minerals—Lithium, Titanium, Beryl/Beryllium, Niobium, Tantalum, and Zirconium—were de-listed from Atomic Minerals and reclassified into Part D to allow private sector exploration.)

Part C: Metallic and Non-Metallic Major Minerals – High-value metallic ores and industrial major minerals:

• Metallic: Iron Ore, Bauxite (Aluminum), Copper, Gold, Silver, Lead, Zinc, Manganese Ore, Chromite.
• Industrial/Precious: Limestone (Cement Grade), Precious Stones (Diamonds, Emeralds, Rubies).

Part D: Critical and Strategic Minerals – Inserted to secure minerals vital for high-tech, defense, electric vehicles, semiconductors, and green technology. The Central Government holds exclusive power to conduct auctions for these minerals like Lithium, Graphite, Nickel and Rare Earth Elements etc.

Practice MCQ  

​Q. Given below are two statements, one labeled as Assertion (A) and the other as Reason (R):

• ​Assertion (A): The introduction of Section 9D under the MMDR Amendment Act, 2026, restricts State Governments from levying any tax, cess, or duty on mineral-bearing lands without Central approval.
• ​Reason (R): The MMDR Amendment Act, 2026 seeks to address these concerns by bringing predictability, uniformity and rationality to the taxation of minerals.

​In the light of the above statements, choose the correct option:

​(a) Both (A) and (R) are correct, and (R) is the correct explanation of (A).

(b) Both (A) and (R) are correct, but (R) is NOT the correct explanation of (A).

(c) (A) is correct, but (R) is incorrect.

(d) (A) is incorrect, but (R) is correct.

Answer: (b)

Practice Question 

​Q. “The recent provisions introduced under the Mines and Minerals (Development and Regulation) Amendment Act, 2026, attempt to strike a balance between investor predictability and fiscal federalism.” Highlight the key changes introduced by the amendment and examine its wider socio-economic and constitutional implications. (10 Marks)

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