Why Are States Divided Over the Mining Amendment?

07 Oct 2026

Tags: Economy   Infrastructure   Energy Sector

Source: The Hindu

Context: The Mines and Minerals (Development and Regulation) Amendment Act, 2026 has triggered a fresh Centre–State dispute over the regulation and taxation of mineral resources.

• The amendment expands the Centre’s regulatory powers and places restrictions on States’ ability to impose certain taxes on mineral rights and mineral-bearing lands.
• The controversy therefore extends beyond mining regulation to the broader issue of States’ fiscal autonomy and Indian federalism.

What Has the Amendment Changed?

• The Centre's regulatory powers now extend beyond mines and mineral development to mineral-bearing lands.
• States are barred from imposing fresh taxes on mineral rights and mineral-bearing lands, except under conditions prescribed by the Union Government.
• Certain mineral-related taxes imposed by States but not fully collected before the amendment came into force are rendered invalid.
• This potentially reduces future and outstanding mineral-related revenues of mineral-rich States.

Constitutional Division of Powers

• Mining involves a shared constitutional framework:
  • Entry 23, State List: States can regulate mines and mineral development, subject to limitations imposed by Parliament.
  • Entry 54, Union List: Parliament can regulate mines and mineral development in the public interest.
  • Entry 50, State List: States can tax mineral rights, subject to limitations imposed by Parliament relating to mineral development.
  • Entry 49, State List: States can impose taxes on lands and buildings, relevant to taxation of mineral-bearing land.
• Thus, while Parliament has significant regulatory authority over mineral development, States retain constitutionally recognised taxation powers relating to mineral rights and land.

Supreme Court’s 2024 Position

• The amendment has raised constitutional concerns because some of its provisions appear to depart from the position articulated by the Supreme Court in 2024.
• The Court held that States can tax mineral rights, subject to Parliament's constitutional power to impose limitations in the public interest.
• It also held that Parliament could not use its powers under Entry 54 to curtail the States’ power to tax mineral-bearing land.
• The 2026 amendment has therefore triggered questions about the permissible limits of Parliament's power over mineral taxation.

Centre’s Argument

• The Centre argues that multiple and uneven State-level mineral taxes increase the cost of domestic minerals.
• Higher domestic mineral costs can make industries more dependent on imports, potentially affecting competitiveness.
• The Centre also argues that excessive mineral taxation can increase the burden on the public exchequer.
• From this perspective, greater uniformity in mineral taxation is intended to improve the efficiency of the domestic mineral economy.

Fiscal Stakes for Mineral-Rich States

• Mineral revenues constitute very different shares of States’ non-tax revenue, creating varying degrees of exposure to the amendment.
• Dependence is particularly high in:
  • Jharkhand – 85%
  • Odisha – 80%
  • Karnataka – 48%
  • Madhya Pradesh – 41%
  • Rajasthan – 39%
• Dependence is considerably lower in Telangana (11%) and Chhattisgarh (6%).
• Consequently, restrictions on mineral-related taxation have potentially much greater fiscal implications for States such as Jharkhand and Odisha.

Why Are States Responding Differently?

• Odisha: Despite substantial dependence on mineral revenue, the State government has argued that the amendment will not adversely affect its mineral revenues, while the Opposition has demanded a special Assembly session.
• Telangana: Despite relatively low dependence on mineral receipts, it has joined other non-NDA-ruled States in considering legal action.
• Karnataka, Telangana, Himachal Pradesh and Kerala: Planning to challenge the amendment in the Supreme Court on grounds relating to State taxation powers and federalism.
• Kerala: Has additionally raised concerns that the treatment of mineral-bearing land could expand Union influence over areas such as coastal and forest regions.
• Jharkhand: Has objected to the loss of revenue from uncollected mineral taxes, arguing that reduced revenues could affect social-security programmes.
• Madhya Pradesh, Rajasthan and Chhattisgarh: No comparable legal challenge has emerged so far.

Mineral Dependence and Political Alignment

• The controversy illustrates that Centre–State disputes do not produce uniform political responses across States.
• Mineral dependence determines the material fiscal stake a State has in the issue.
• Political alignment can influence whether that fiscal concern develops into an organised federal challenge.
• Odisha demonstrates that even a highly mineral-dependent State may adopt a different political position from other similarly placed States.

Fiscal Federalism in India

• India's fiscal structure is asymmetric rather than purely decentralised.
• The Union has relatively greater taxation powers, while States have substantial expenditure responsibilities in areas such as health, education and other public services.
• States also depend significantly on tax devolution, grants and other transfers from the Centre.
• Union influence over State borrowing further affects the degree of effective State fiscal autonomy.
• This creates a recurring tension between national economic coordination and State-level fiscal autonomy.

Centre–State Federal Tensions: Broader Context

• The mining amendment adds another dimension to India's continuing Centre–State negotiations over legislative powers, financial resources and administrative authority.
• Similar disputes have emerged over:
  • GST compensation and revenue sharing
  • Finance Commission terms of reference
  • National Education Policy
  • Citizenship Amendment Act
  • All-India Services rules
• The broader issue is the balance between a strong Union for national coordination and adequate State autonomy in India's federal system.

Key Constitutional Concepts

• Federalism: Division of governmental powers between the Union and States, with each deriving authority from the Constitution.
• Fiscal federalism: Distribution of taxation powers, expenditure responsibilities and financial resources between different levels of government.
• India's federalism combines federal and unitary features, with the Constitution giving the Union a comparatively stronger position in several domains.
• Seventh Schedule distributes legislative subjects between the Union, State and Concurrent Lists.
• Article 246 establishes the broad framework for legislative competence based on these Lists.

Mineral Governance

• MMDR Act, 1957 is the principal Central legislation governing the development and regulation of mines and minerals.
• Mineral governance illustrates the constitutional principle that State-level powers can operate subject to Parliament's legislation in areas where the Constitution gives the Union overriding authority.
• The present dispute is therefore important not merely as a mining-policy issue but as a case study in the continuing tension between resource governance, fiscal federalism and State autonomy.