Model Answer

The MMDR Act, 1957 regulates mineral development under Union control, while States possess taxation powers over mineral rights. The 2026 Amendment seeks fiscal predictability after the Supreme Court affirmed States’ mineral-taxation competence in 2024.

Significance of the 2026 Amendment

1. It seeks uniformity in mineral taxation across States. e.g: New Section 9D.
2. It improves investment certainty by limiting unpredictable State levies. e.g: Conditions on taxes and cesses.
3. It can reduce mining costs and promote domestic production. e.g: Critical minerals needed for energy transition.
4. It strengthens Union oversight over mineral-bearing lands. e.g: Amendment to Section 2.
5. Unrecovered pre-commencement levies are deemed invalid, reducing legacy liabilities.

Implications for fiscal federalism

1. It restricts States’ taxation autonomy. e.g: Entry 50, State List.
2. Mineral-rich States may face revenue constraints. e.g: Concerns raised by Jharkhand and Kerala.
3. Greater Union rule-making may centralise mineral governance. e.g: Entry 54, Union List.
4. It responds legislatively to Mineral Area Development Authority v. SAIL (2024), which upheld States’ power to tax mineral rights.

Way Forward

1. Prescribe taxation limits through Centre-State consultation.
2. Ensure predictable revenues for mineral-bearing States.
3. Strengthen DMF-based benefit-sharing for mining-affected communities.

A predictable mineral regime can promote investment and resource security, but its legitimacy requires preserving fiscal federalism and ensuring that mineral-producing States receive an equitable share.