Article 3: On minerals and mines, strike a new federal balance
Why in news: Parliament passed the Mines and Minerals Amendment Bill, 2026, restricting states’ powers to levy taxes on mineral rights and mineral-bearing lands, raising concerns over fiscal federalism.
Key Details
- Bill passed: Parliament passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2026.
- States’ powers: It restricts states from imposing certain levies on mineral rights and mineral-bearing lands.
- Centre’s rationale: Aims to provide regulatory certainty, attract investment and prevent higher levies from raising infrastructure costs.
- States’ concerns: States fear reduced revenues and weakening of their fiscal autonomy.
- Supreme Court ruling: The amendments follow the Court’s recognition of states’ power to tax mineral rights, including recovery of arrears from April 1, 2005.
Key Amendments
- Parliament passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2026 last week.
- The Bill restricts states’ powers to impose levies on mineral rights and mineral-bearing lands.
- It seeks to bring greater certainty and predictability to the mining sector.
Centre’s Rationale
- The amendments aim to facilitate investment in the mining sector.
- They seek to prevent higher state levies from increasing infrastructure and production costs.
- The Centre argues that a predictable tax structure can improve the business environment.
Concerns of States
- States have raised concerns over the possible impact on their revenues.
- The issue also raises broader questions about fiscal federalism.
- States fear that restrictions on their taxing powers could reduce their financial autonomy.
Supreme Court Context
- The amendments follow a Supreme Court ruling upholding states’ power to impose taxes on mineral rights.
- The Court also allowed states to recover arrears dating back to April 1, 2005.
- Following the ruling, several states began exploring ways to increase revenue from mineral resources.
State-Level Levies
- States impose around 14 types of taxes, charges, fees and levies on the mining sector.
- These include royalty, auction premium and other mineral-related charges.
- The rates of royalties and other levies vary across states.
- For example, Jharkhand imposed a tax on iron ore, initially at ₹100 per tonne, which was later increased.
- Tamil Nadu has imposed a tax of ₹160 per tonne on limestone.
Conclusion
The amendments seek to balance investment, regulatory certainty and affordable infrastructure with states’ fiscal interests. While a predictable mining regime can support economic growth, limiting states’ revenue-raising powers may strain cooperative federalism. The Centre should ensure adequate consultation, transparent revenue-sharing mechanisms and safeguards for state finances. A balanced framework can promote mining-sector efficiency without weakening the fiscal autonomy of states.
Descriptive question:
Discuss the implications of the Mines and Minerals (Development and Regulation) Amendment Bill, 2026 for fiscal federalism, state revenues and investment in India’s mining sector. (150 words, 10 marks)
Source: The Indian Express