India’s mining sector needs investment, predictability and a stable tax regime. But those goals should not come at the cost of weakening the financial authority of states that sit on the country’s mineral wealth.
That is the concern at the heart of the Mines and Minerals (Development and Regulation) Amendment Act, 2026. The new law restricts states from imposing fresh taxes, cesses or similar levies on rights bearing land except within conditions prescribed by the Centre. The government argues that a uniform framework will prevent excessive taxation, reduce uncertainty for investors and support development. It has also stressed that roughly 90% of mining-related taxes and statutory payments already accrue to states.
The economic argument deserves consideration. India is trying to attract investment into critical minerals, expand domestic mining and reduce import dependence. A patchwork of sharply different state levies can raise costs and make long-term investment decisions harder.
But federalism is also an economic principle.
Mineral-rich states bear costs that are easy to overlook from New Delhi. Mining affects land, roads, water, local communities and the environment. States must fund healthcare, infrastructure and rehabilitation in regions where mineral extraction takes place. The ability to raise revenue from that economic activity is therefore not merely a constitutional privilege. It has a direct connection with development on the ground.
The Supreme Court brought this issue into sharp focus in 2024. A nine-judge Constitution Bench held by an 8:1 majority that royalty is not a tax and affirmed states’ legislative power to tax mineral rights, subject to limitations Parliament may impose. The judgment also recognised the distinct constitutional field available to states for taxing land.
The 2026 amendment has consequently triggered strong objections. Odisha’s former chief minister Naveen Patnaik has argued that restricting state taxation powers threatens fiscal autonomy and could hurt spending on healthcare, education and infrastructure. Jharkhand has even more immediate stakes. Its mineral-bearing land cess generated ₹7,488 crore in 2025-26 and had been projected to yield ₹13,215 crore this year. Karnataka had also budgeted around ₹3,000 crore from a mineral levy.
These are not insignificant numbers for state budgets.
There is another complication. The law protects amounts that states have already collected but extinguishes certain demands that were raised but remained unpaid. For mineral-rich states expecting substantial arrears following the Supreme Court ruling, this could materially alter their fiscal calculations.
The debate should therefore not be reduced to Centre versus states or industry versus taxation.
India needs a middle path.
If wildly different mineral taxes genuinely threaten investment or encourage imports, the Centre and mineral-producing states should agree on reasonable limits together. A GST Council-like consultative mechanism for mineral taxation could offer one route. States would retain a meaningful voice while industry receives the predictability it seeks.
India’s minerals are national economic assets, but they are extracted from land located within states and communities that live with the consequences of mining every day.
A strong Union does not require financially weaker states. Cooperative federalism works when national priorities and state rights are negotiated, not when one is expected to surrender to the other.
Uniformity may make mining policy simpler. Consensus would make it stronger.
