Mining Bill 2026: Centre-State Fiscal Federalism and Mineral Revenue Debate

Mining Bill 2026 Latest News

• Parliament has passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2026 reigniting a long-standing tussle between the Centre and states over the taxation of mineral resources and the revenues they generate.

What Does the Amendment Change?

• The Bill restricts states from imposing specified levies on mineral rights and mineral-bearing land.
• This comes even as several mineral-rich states had begun exploring such levies following the Supreme Court’s landmark 2024 ruling that upheld states’ power to tax mineral rights.
• The Bill will also extinguish unpaid or unrecovered dues arising from such levies imposed before it comes into force — estimated at around Rs 2 lakh crore across the mining sector.
• According to the Mines Ministry, around 14 levies currently exist in the mineral sector; these will continue, but their cumulative burden will be capped at a percentage to be decided after consultation with states.

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Background: The Supreme Court’s 2024 Ruling

• In July 2024, the Supreme Court upheld states’ power to levy taxes on mineral rights and mineral-bearing land, overruling the 1989 judgment in India Cement Ltd v. State of Tamil Nadu.
  • The 1989 judgement had held that royalty was a tax falling under the Union List, beyond states’ legislative competence. 
• The 2024 ruling also waived interest and penalties on pre-judgment tax demands and allowed staggered payment of dues over 12 years from April 1, 2026. 
• This opened the door for states to raise additional mining revenue — Jharkhand and Tamil Nadu introduced Mineral-Bearing Land (MBL) taxes, while Karnataka proposed a tax on non-auctioned iron ore mines. 
  • Jharkhand’s MBL tax on iron ore rose from Rs 100 to Rs 400 per tonne.
  • Tamil Nadu imposed an MBL tax of Rs 160 per tonne on limestone.

Centre’s Rationale

• The Centre argues that unchecked state-level levies raise the cost of key minerals, feeding into inflation and infrastructure costs.
• Mining industry experts note that beyond royalty, companies already pay District Mineral Foundation and National Mineral Exploration Trust contributions, along with environmental and pollution cesses — with the MBL tax seen as the largest additional burden.
• Industry voices argue the amendments provide fiscal certainty without causing material revenue loss to states, since many of these levies have been under legal dispute for decades.

States’ Opposition and Revenue Concerns

• Jharkhand: CM of Jharkhand has cited potential revenue loss. In a letter to the Prime Minister, he stated mining revenue formed about 84.9% of the state’s own non-tax revenue in 2024-25, with the Mineral Bearing Land Cess alone expected to generate around Rs 11,000 crore annually. 
• Kerala: The govt has raised concerns over implications for India’s federal structure. 

Data on dependence

• As per the CAG report on state finances, states’ own non-tax revenue stood at Rs 3.3 lakh crore in 2024-25, of which 41% (Rs 1.36 lakh crore) came from mineral and petroleum receipts. 
• Nationally, this forms just 3.4% of states’ revenue receipts, but the share is far higher for mineral-rich states: 23% for Odisha, 13% for Jharkhand, and 5% for Chhattisgarh.

Need for a Balanced Approach

• Experts caution against framing the issue as a binary choice between competitive mining and state revenues. 
• Instead, they recommend the Centre use the new framework to set transparent guardrails through genuine consultation with mineral-producing states, ensuring cost predictability for industry without leaving states fiscally shortchanged.

Conclusion

• The Mining Amendment Bill, 2026, revives the classic Centre-state fiscal federalism debate — balancing industry’s need for tax certainty against resource-rich states’ dependence on mineral revenue for welfare and development. 
• Its success will hinge on transparent, consultative implementation rather than a one-sided assertion of central authority.

Source: IE | DH