India wants to build electric vehicles, missiles and solar parks without having to ask Beijing for permission every time it needs the raw materials that go into them. That ambition ran straight into a messier, more local fight this month. Who actually gets to tax the iron ore, bauxite and chromite that make all of this possible in the first place?
On August 13, Parliament passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2026, and sent it to the President for assent. On the surface, the move looks simple enough. A new Section 9D says states can no longer tax mineral rights or mineral‑bearing land except on terms the Centre lays down. And any state levy that hasn’t actually been collected yet? The Bill treats it as if it never existed.
That second part is where things get complicated. Just two years ago, a nine‑judge Constitution Bench told India’s mineral rich states, Odisha chief among them, that they had every right to tax the wealth under their own soil. Parliament has now, in effect, replied: thank you, but not like that.
What follows is a fight about federalism dressed up as a debate over tax policy. A right of centre reading of this moment should resist the urge to pick a side out of habit. The Bill deserves to be judged on whether it strengthens India’s mineral security and improves the investment climate. It also deserves to be judged on whether a Centre that claims to prize the rule of law can, through ordinary legislation, wipe out revenue rights that nine judges spent eight days of hearings carefully establishing. Both questions matter. Neither cancels the other.
What the 2026 amendment actually does?
Strip away the political noise, and the Bill really does three things.
First, it quietly expands the Union’s control under the 69-year-old MMDR Act. Earlier, Section 2 was mostly about mines; now it explicitly covers ‘mineral-bearing lands’ as well.
Second, it draws a hard line around state taxing power. The new Section 9D says no state can impose any tax, cess or levy on mineral rights or mineral bearing land, whether linked to quantity, value or royalty, unless the Centre’s rules allow it. In simple terms, if Delhi doesn’t permit it, the state can’t charge it.
Third, and this is the bit that has set off alarm bells from Ranchi to Bhubaneswar, any levy a state had assessed but not yet actually collected before the law kicks in is treated as if it never existed. Money already deposited or recovered stays with the state; money still on paper, still in dispute, still waiting to be collected, disappears.
The Mines Ministry’s own justification, spelt out in the PIB release on the Bill, is straightforward and not unreasonable on the face of it. Today, mining companies have to navigate around 14 different types of taxes, charges, fees and other levies on mining operations, royalty, auction premium, dead rent, District Mineral Foundation contributions, GST, transit fees and more, layered inconsistently across states. The government also insists this is not a central revenue grab. Between FY 2015‑16 and FY 2025‑26, major mining states received more than Rs 5 lakh crore from the sector, while the Centre’s share during the same period stood at around Rs 82,000 crore. States, it says, will continue to receive around 90 per cent of total taxes and statutory payments from mining operations even after the amendment is implemented.
The MMDR Amendment Bill 2026 does not reduce the revenue accrued to States or alter the existing regulatory control over nearly 50 minor minerals.
— Ministry of Coal (@CoalMinistry) August 16, 2026
From royalty and auction premium to DMF benefits and the State’s share of GST, the revenue streams to States remain fully intact.… pic.twitter.com/4CQhM5XnG6
Whether that reassurance survives contact with Section 9D’s fine print is exactly what mineral rich states are now testing.
The strategic case
On this point, the government’s instinct is broadly right, and a conservative should say so without hedging just to look balanced. Mining isn’t merely a source of tax revenue, it is industrial policy in disguise, and increasingly, it is geopolitics.
Every tonne of nickel or lithium that India cannot mine or refine at home is a tonne bought from a supply chain dominated by China at the processing stage. Beijing controls roughly 60-70% of global refining and processing capacity for key minerals such as lithium, nickel and cobalt, and about 90% of rare earth refining. India’s critical mineral import bill more than doubled from US$3.03 billion in 2020-21 to US$8.01 billion in 2023-24, while exports in the same category fell from US$5 billion to US$3.99 billion over the same period. The country is entirely import-dependent for lithium, cobalt and nickel, and China alone accounts for over 80% of India’s lithium imports.
A NITI Aayog assessment this February found that, under a net‑zero scenario, mineral demand will be 51% higher than under current policy. In other words, dependence deepens, not eases, precisely as India races to build EVs, batteries, defence platforms and renewable capacity.
One reason domestic capital hesitates to invest in exploration and downstream processing, and instead leans on imports, is fragmented and unpredictable state taxation. Investors do not look only at today’s tax rate; they also factor in the risk that tomorrow’s assembly, or tomorrow’s court, will change the rules retroactively. Mining executives told Business Standard that Odisha had imposed a cess of nearly 12% of the average sale price, while Jharkhand’s cess was around ₹450 per tonne for coal and ₹600 per tonne for iron ore, real costs that get passed on to steelmakers and, eventually, consumers.
The Bill’s quieter provisions point in the same direction: it allows leaseholders to add multiple minerals to an existing mining lease and removes the cap on the sale of minerals from captive mines. The China‑competition argument here is not rhetorical flourish. It is arithmetic.
The 2024 verdict: Constitutional bedrock and its tensions
On July 25, 2024, a nine judge Constitution Bench headed by then Chief Justice D.Y. Chandrachud delivered an 8:1 verdict in Mineral Area Development Authority v. Steel Authority of India. The Court held that royalty is not a tax, it is a payment that arises from the contractual right to enjoy mineral rights. On that basis, it ruled that state legislatures have the power to tax mineral rights, since the MMDR Act, 1957 does not impose any such restriction, a gap the 2026 Bill now seeks to close. The judgment also overturned the Court’s own 1989 ruling in India Cement, which had treated royalty as a tax.
Three weeks later, on August 14, 2024, the same bench addressed the question the industry feared most. It directed that tax demands would not apply to transactions before April 1, 2005, and that payment of such demands would be staggered in instalments over 12 years from April 1, 2026, with interest and penalties waived for the period before the July verdict.
Justice B.V. Nagarathna’s lone dissent deserves more attention than it usually gets, because it is essentially the argument the Centre is now trying to win through legislation after losing it in court. She held that royalty was, in nature, a tax; that Parliament had effectively occupied the field of mineral‑development taxation through the MMDR Act, and she warned, as one analysis of her opinion put it, of a patchwork of state levies eroding the MMDR Act’s goal of a consistent national policy, potentially sparking a competitive cycle of rising cesses in mineral‑rich states. It is a serious argument, not merely a losing one, which may be why the Centre, after losing 8:1, first exhausted judicial recourse before turning to Parliament.
A review petition dismissed in September 2024, followed roughly a year later by a curative petition, the last resort under Indian law, warning of a financial burden on mining companies to the tune of Rs 1,50,000 crore in arrears and an additional recurring annual financial burden.
That curative petition remains undecided. As recently as May 2026, the Supreme Court indicated it would hear pleas regarding the legislative power of states to tax mineral rights only after Solicitor General Tushar Mehta’s request that the curative plea be decided first. The 2026 Bill therefore arrives not after the constitutional question was settled, but while it remains, technically, sub judice, an awkward sequence for anyone who values institutional process over expedience.
The Odisha question: Dues, deeming clauses and federal honour
Odisha isn’t a side character in this story; it is the story. In 2022-23, the state accounted for 41.9% of India’s total mineral production (excluding fuel oil and atomic minerals). Its own mines department puts its share of national reserves at 28% for iron ore, 24% for coal, 59% for bauxite and a staggering 98% for chromite. Mining royalties and auctions bring in an estimated Rs 50,000-55,000 crore in non‑tax revenue every year, roughly 35-40% of the state’s total own revenue, and about a fifth of its total revenue receipts once central transfers are counted in.
That’s why the deeming clause hits so hard in Bhubaneswar. Estimates reported by Business Standard on August 14 suggest Odisha could lose around Rs 12,000 crore in annual mineral-related revenue and more than Rs 1 trillion in outstanding dues. That number sits within a wider industry estimate that total arrears across states run to Rs 1.5 lakh crore, with Odisha alone in line to recover over Rs 1 lakh crore, dues linked to the 2024 verdict’s twelve-year recovery window, which was due to open only this April.
It’s worth being precise. This is an estimate of foregone recovery, not an audited government figure, and deserves the same caution one applies to the Centre’s own ₹1.5 lakh crore national number cited earlier. It is also a different reckoning altogether from Odisha’s older, separate fight to recover illegal mining compensation under a 2017 Supreme Court order, where the state has recovered ₹2,745.77 crore (excluding interest) and been pulled up for ‘dilly‑dallying’ in recovery of mining dues as recently as October 2025. The trillion rupee figure belongs to the 2024 royalty verdict alone, and even if generously discounted, it is a sum equal to most of a year’s mining revenue for the state, forfeited not because a court found the demand unlawful, but because Parliament deemed it so.
That difference ought to matter to anyone who calls themselves a conservative. This isn’t Delhi blocking some speculative bonus, it’s Parliament erasing a right the Supreme Court itself said was lawful, just months before the recovery window the Court designed was meant to open. Central government is rightly suspicious of overreaching state power, but a state’s lawful, court backed claim on revenue is also a kind of property. When Parliament wipes that out by a single stroke, however constitutionally permissible, it cuts against that same instinct. If a due certified by a court can vanish the moment it becomes inconvenient for the debtor, what was that certification really worth?
With grave concern, I bring to the attention of Hon’ble Chief Minister Shri @MohanMOdisha ji about the recent passage of the Mines and Minerals (Development and Regulation) Amendment Bill, 2026 by Parliament. This legislation poses a serious threat to #Odisha's fiscal autonomy… pic.twitter.com/eOJ5zVFgRI
— Naveen Patnaik (@Naveen_Odisha) August 14, 2026
It’s hard to ignore that Odisha, a state whose open cast mines, red dust and displaced villages are the real, physical price of being India’s mineral warehouse, is being asked to write off, through a deeming clause, dues that a nine judge bench took pains to uphold. The environmental and social costs of extraction in Keonjhar, Sundargarh and Jajpur were never going to be shared across the country; now it seems the compensating revenue won’t be fully guaranteed to stay local either.
None of this means the deeming clause should be left as it is. A serious government, one who cares about investor certainty and also respects court‑affirmed dues, should push for three course corrections.
- First, a transition window, under judicial or CAG supervision, for dues already assessed and demanded before the law comes into force, instead of a blanket wipe out.
- Second, a time-bound, independent audit of exactly what states are owed, so Delhi’s ₹1.5 lakh crore figure and Odisha’s 1 lakh crore claim rest on the same verifiable numbers rather than competing press notes.
- Third, if Parliament insists on uniformity from now on, it should pair that with a formal compensation mechanism for states losing a large, court affirmed income stream, not leave them dependent on the Centre’s annual goodwill. Federal honour isn’t sentiment. It’s a design problem, and this Bill has left it unsolved.
Federalism, not obstruction: Vision of centre-state relations
Think of it this way, a strong Centre handling defence, foreign policy and macroeconomic stability doesn’t have to come at the cost of strong, responsible states. In fact, the two actually need each other. The real question isn’t about strength versus strength, it’s about how Delhi chooses to use its power. There’s a big difference between setting a clear, uniform rule for the future and reaching back to undo what states have already earned legally.
The worry here is the precedent being set. If a simple legislative clause can override a nine judge constitutional ruling on fiscal rights just because it’s become economically inconvenient, that’s a tool future governments could use too, and the next one may not be as restrained as this one. Conservatives, of all people, should think twice before normalising that.
India isn’t the only country wrestling with this. Take Australia, for two decades, there’s been a heated debate over whether Western Australia’s mining royalties should cut into its share of national GST revenue. According to the state government’s own data, without the GST reforms, WA keeps just 11% of its iron ore and lithium royalties; the other 89% goes to other states. Meanwhile, other major mining states keep up to 98% of what they earn from mining. This tension shows up in every country where mineral wealth is concentrated in a few regions. Extraction costs are local, borne by the communities and ecosystems where mining happens, but the benefits spread nationally, even globally.
India doesn’t have to copy Australia’s solution. But it shouldn’t act like this dilemma is unique or too messy for serious policy design.
The way forward is cooperative federalism with real teeth, not obstruction disguised as principle. Yes, set a uniform national ceiling on future levies. But also build jointly run institutions for exploration funding, environmental restoration and local development, where mineral-rich states like Odisha and Jharkhand sit at the table as partners, not petitioners. These states aren’t asking to opt out of a national mineral strategy. They’re simply saying that don’t make us its unwilling bankers.
India’s mineral capacity: What we have, what we could be
Here’s the paradox of Indian mining. The country is geologically rich but industrially underleveraged. Yes, Odisha dominates in chromite and bauxite. But India also sits on significant manganese and limestone reserves. And then there’s the increasingly important piece which the government estimates 7.23 million tonnes of rare earth oxide equivalent resources, much of it locked in beach sands (monazite) along the coasts of Kerala, Odisha and Tamil Nadu. The National Critical Minerals Mission, approved by the Cabinet in early 2025 with an outlay of ₹16,300 crore, is a real attempt to bridge the gap between what’s underground and what actually makes it to the factory floor.
But having reserves doesn’t automatically mean production, and production doesn’t guarantee value addition. For years, litigation uncertainty, slow clearances and an unpredictable fiscal patchwork have kept India importing around 12.47 million tonnes of critical minerals in 2024-25, even as domestic deposits remain underexploited. A truly predictable regime, one that’s uniform but also fair to the states sitting on these resources, could close that gap faster than any import-substitution scheme ever could.
The stakes are clear. India is aiming for crude steel production capacity of 300 million tonnes a year by 2030 and 500 million tonnes by 2047. Those ambitions are hostage to exactly the kind of policy stability this Bill, at its best, is meant to deliver.
Conclusion
Strip away the noise and three things stand out as true. First, India genuinely needs a uniform, predictable mineral tax regime if it wants to compete with China on critical minerals, instead of just outsourcing its dependence on them. Second, the Supreme Court’s 2024 verdict and Odisha’s outstanding dues aren’t inconvenient details to be legislated around. They’re the constitutional and moral baseline against which any new framework must be judged. And third, a Bill that gets the first part right but tramples the second has only done half its job. Investors, after all, read both signals. A government that can wipe out a court-affirmed due today is one that can renege on a tax promise tomorrow. The blueprint isn’t complicated, even if the politics are. One national framework for future levies. An honoured, audited transition for dues already earned under the old regime. And durable federal institutions, not annual handouts dispensed as favours, for the states that bear mining’s costs on their land and in their lungs. Delhi can have its uniform mining taxes. It shouldn’t get to keep the change too.
