Why mineral-rich states are upset over amending mines law

Mining Law Amendment Sparks Centre-State Clash Over Mineral Taxation

A new law passed by Parliament during the Monsoon session has ignited a fresh confrontation between the Centre and mineral-rich states over the taxation of mines and mineral-bearing land. The Mines and Minerals (Development and Regulation) Amendment Act, 2026, aims to bring greater uniformity in the taxation of major minerals, but it has drawn sharp criticism from states that argue it undermines their fiscal powers and revenue.

What the Amendment Changes

The amendment to the MMDR Act, 1957, introduces significant changes to how states can levy taxes on mining operations. It adds the words "and mineral bearing lands" to Section 2 of the Act and defines mineral-bearing land as land containing mineral content according to parameters prescribed by the Central government.

More notably, the new Section 9D prohibits states from imposing any tax, cess, or other levy on mineral rights or mineral-bearing land based on the quantity or value of minerals, royalty payable, or any similar basis. States may only impose such levies if they follow conditions prescribed by the Central government. Additionally, any state-imposed tax that has not been deposited or recovered before the law comes into effect will be treated as invalid, though money already collected will not be refunded.

The amendment comes two years after the Supreme Court's nine-judge Constitution Bench ruled in July 2024 that states have legislative competence to impose taxes on mineral rights and can recover outstanding dues from April 1, 2005. The ruling had opened the door for states to claim significant arrears.

Government's Rationale

The Central government defends the amendment as necessary to prevent high and varying state taxes from making domestic minerals more expensive and less competitive than imports. It points to India's mineral import bill of ₹10,12,529 crore in FY 2025-26 as evidence of the problem.

Mines and coal minister G Kishan Reddy has said the amendment does not interfere with state autonomy or revenue rights. He noted that around 90% of total taxes and statutory payments from mining accrue to states, which receive revenue through about 14 types of taxes, charges, and fees, including royalty, auction premium, dead rent, District Mineral Foundation contributions, GST, and transit fees.

Government data shows that from FY 2015-16 to FY 2025-26, more than ₹5 lakh crore accrued to major mining states, while the Centre received around ₹82,000 crore. Between 2020-21 and 2025-26, major mining states collected more than ₹96,000 crore in auction premiums alone.

States' Opposition

Mineral-rich states have strongly opposed the amendment, arguing that it encroaches on their constitutional rights over land, which is a State List subject (Entry 18), and taxation on land and mineral rights (Entries 49 and 50). They argue that the new law effectively centralizes control over a key revenue source.

Jharkhand, which derived 84.9% of its own non-tax revenue from mining in 2024-25, has been particularly vocal. Its mineral-bearing land cess generated ₹7,488 crore in 2025-26 and is estimated to bring in ₹13,215 crore in 2026-27. Karnataka, which had estimated additional revenue of around ₹3,000 crore from its tax on major minerals for 2025-26, has also objected. Karnataka Deputy Chief Minister G Parameshwara has urged the Centre to withdraw the law and has written to Prime Minister Narendra Modi and mines minister G Kishan Reddy.

Kerala Chief Minister V D Satheesan said the amendment goes against federal principles and affects the rights of states over their land.

Odisha's Particular Grievance

Odisha, one of India's leading mineral producers, has potential claims of more than ₹1 lakh crore in past mineral-tax dues following the 2024 Supreme Court ruling. Industry estimates put total outstanding mineral-tax claims nationally at around ₹1.5-2 lakh crore.

Opposition parties in Odisha — the Biju Janata Dal (BJD) and Congress — have escalated their campaign against the amendment. They have demanded a special session of the state assembly to discuss the issue, but Parliamentary Affairs Minister Mukesh Mahaling rejected the demand, saying the matter can be taken up in the upcoming Monsoon session.

The Congress has announced street protests and torchlight processions across the state starting Monday, with plans to surround the houses of BJP MPs. Congress whip Razen Ekka said demonstrations will be held from the state capital to gram panchayats. Congress vice-president Santosh Singh Saluja claimed the state would lose about ₹10,000 crore annually and lakhs of crores in arrears, alleging the Centre is seeking control over Odisha's natural resources.

The BJD has questioned the silence of the 25 BJP MPs from Odisha (20 Lok Sabha, 5 Rajya Sabha) during the bill's passage. BJD leader Pritiranjan Gharai claimed the bill was passed without discussion and that revenue from all mines will come under central government control. BJD MLA Byomkesh Ray alleged Chief Minister Mohan Charan Majhi, who hails from the mineral-rich district of Kendujhar, was "made the Chief Minister only to facilitate the looting of Odisha's mineral resources."

BJD supremo and former Chief Minister Naveen Patnaik has demanded a dedicated discussion in Parliament and warned of mass agitations if the state's interests are not protected.

Outlook

The amendment has set the stage for a prolonged legal and political battle. Several states are reportedly considering court challenges, while the government maintains that the law clarifies the constitutional framework and promotes a stable mining environment. The outcome will hinge on how courts interpret the balance between central regulation and state fiscal autonomy.