Why are States divided over the mining amendment?, Pg8

Key Highlights:

• The Mines and Minerals (Development and Regulation) Amendment Act, 2026 expanded the Centre's regulatory powers over mining and mineral-bearing lands.
• The amendment restricts States from imposing new taxes on mineral rights and mineral-bearing lands, except under conditions prescribed by the Union government.
• It also cancels uncollected past mineral taxes imposed by States before the Act came into force.
• This legislative change has led to a division between the Centre and several States, impacting the fiscal autonomy of mineral-rich States.
• The Supreme Court, in a 2024 ruling, affirmed States' power to tax mineral rights and mineral-bearing lands, which contradicts aspects of the new amendment.

MMDR Amendment.jpg

Detailed Insights:

• The Mines and Minerals (Development and Regulation) Amendment Act, 2026 inserted Section 9D into the parent Mines and Minerals (Development and Regulation) Act, 1957.
• The Centre justifies the amendment by citing the need for a predictable tax environment, preventing excessive levies, and encouraging long-term investment in the mining sector.
• States like Jharkhand and Odisha are highly dependent on mineral-related receipts, which constitute 85% and 80% of their non-tax revenue, respectively.
• The Supreme Court, in its 8:1 majority judgment on July 25, 2024, in the case of Mineral Area Development Authority & Anr. v. M/s Steel Authority of India & Anr., held that States possess the power to levy taxes on mines and minerals.
• This ruling clarified that royalty is not a tax, thereby overturning the 1989 India Cement Ltd. v. State of Tamil Nadu judgment.
• The Court affirmed that State legislatures are competent to levy tax on mineral-bearing land under Entry 49 of List II and can use mineral produce or royalty as a measure for taxation.
• It also stated that Parliament cannot impose taxes on mineral rights under Entry 54 of List I.
• Several non-NDA ruled States, including Telangana, Karnataka, Himachal Pradesh, and Kerala, are planning to challenge the amendment in the Supreme Court.
• This conflict highlights the ongoing push and pull in Indian federalism regarding legislative jurisdiction and fiscal resources.

Key Concepts Involved:

• Fiscal Federalism: The division of financial powers and responsibilities between central and state governments.
• Union List (Entry 54): Grants Parliament power to regulate mines and mineral development in the public interest.
• State List (Entry 23): Empowers State governments to regulate mines and minerals, subject to central legislation.
• State List (Entry 49): Grants States the power to tax lands and buildings, including mineral-bearing lands.
• State List (Entry 50): Allows States to tax mineral rights, subject to limitations imposed by Parliamentary law on mineral development.