Policy Update
Nivedya Murali
Background
Gone are the times when National security was synonymous lonely to the military might of a country.As nations grew in terms of power and people,not only military capabilities but various other factors such as technology,mineral resource,economic development etc started influencing the effectiveness of national security.Its in this context that the recently introduced Mines and Minerals (Development and Regulation) Amendment Bill, 2026 becomes important.The competition for minerals has become a part of realism followed by states.What is drawn from the ground( mining) will be a prime determinant of security doctrines of future.
The Mines and Minerals (Development and Regulation) Amendment Act, 2026 amends the existing Act to establish a uniform and balanced fiscal framework for the sector. As per the Amendment Act, State Governments cannot levy fresh taxes on mineral rights and mineral-bearing lands, except within conditions prescribed by the Central Government.
( PIB,2026)
The main focus of the amendment is to have a steadily and fairly distributed supply of these resources thereby helping the cause of both national security and everyday livelihood.Before this act, Mining in India was regulated under the Mines and Minerals (Development and Regulation) Act, 1957( MMDR ACT),which was primarily looking into the regulation and development of all mines in India other than the atomic minerals and minerals oils.(Due to their utility in nuclear energy and national security, their regulation differs vastly from major or minor minerals).
The MMDR ACT works with the objective of controlling mining operations, granting mineral concessions, and specifying the framework for mineral development.With the new amendment to the act in 2026 ,the government is trying to bring long term tax stability and predictability to the major and critical mineral sectors,with the main differences being the transition from a highly fragmented, State-dominated fiscal regime to a centralized, uniform, and investor-friendly market framework.(PIB,2026)
Performance
India’s mineral wealth lies in a few States but supports the entire national economy, making its taxation a question of national importance. Unregulated and varying State levies are steadily eroding the viability of mining, raising costs across industry and households alike. The MMDR Amendment Act, 2026 seeks to address these concerns by bringing predictability, uniformity and rationality to the taxation of minerals.(PIB,2026).
The 1957 act suffered from severe structural and economic vulnerabilities. These issues stifled private sector investment, disrupted domestic manufacturing, and triggered a massive constitutional crisis over taxation.The major problem with this can be sited when the 9-judge bench of the Supreme Court, in Mineral Area Development Authority v Steel Authority of India Limited, 2024 INSC 554 (the MADA judgment), overruled the 35-year-old position in India Cement v State of Tamil Nadu, which had characterised royalty as a tax, and upheld the power of State Governments to tax mineral rights.
The Court held that, under Entry 50 of List II, such power can only be limited by an Act of Parliament. Finding no such restriction in the Mines and Minerals (Development and Regulation) Act, 1957 (the MMDR Act), the Court held that the States’ power was unrestrained, permitting them to raise or revive past tax and cess demands retrospectively for a period extending to 1 April 2005.(Montaq legal intelligence,2026).The original act(1957 act) introduced during the state controlled era,it contained many structural flaws and bottle necks,cited as a reason for its amendment.Section 11 of the original Act allowed state governments to grant mining leases based on administrative discretion under a “first-come, first-served” rule.
With this the issue of nepotism, bribery and even corruption created massive loopholes and administration bottle necks within the system.The massive Coalgate and Iron Ore mining scams of the late 2000s can be a valid example for the structural failure of the act.Another major issues was the endless renewal loophole.The old Act allowed for the indefinite renewal of mining leases. When a lease expired, if the state government didn’t officially reject the renewal application, it was “deemed” to be extended.The classification of important minerals like Lithium and Titanium under Part B of the original act, prevented their mining and resulted in India’s dependency on China for these critical minerals.
The Act also failed to clearly define and limit the financial powers of state governments regarding “mineral-bearing lands” versus “mineral rights,which was misused by states to create certain background taxes.The new amendment introduced Section 9D to explicitly ban states from independent mineral cesses.
Impact
With Mining Viability being an important aspect of energy security the new amendment focused on addressing the cumulative and open ended issue of these sectors reducing the multiplicity of levies on a single activity.When Indian minerals cost more than imported ones, user industries such as steel source raw material abroad. India imported minerals worth ₹10,12,529 crore in FY 2025-26.
At the same time, outpriced domestic minerals lose ground in export markets, where iron ore alone earned ₹15,136 crore in FY 2025-26. Curbing this cost escalation is essential to the Atmanirbhar goal in the mineral sector.( Pib,2026).The issue of levying high taxes on strategically and critically important minerals like Uranium making their extraction uneconomical is also addressed.The act states that rational mining taxation is therefore a matter of everyday affordability.
The impact can also be addressed by the major provisions of the new act including
1)New Section 9D — limits on State levies: No tax, cess or other levy, by whatever name called, shall be imposed by a State Government on mineral rights or mineral-bearing lands. This covers levies based on mineral quantity, mineral value, royalty or any other basis. Such levies may be imposed only as per conditions or restrictions prescribed by the Central Government.(Pib,2026)
2)Treatment of past levies: Any levy not paid or collected by the State before the amendment applies will be treated as invalid. However, amounts already deposited or recovered before such commencement shall not be liable to be refunded( pib,2026)
Rule-making power under Section 13: Section 13 of the MMDR Act is amended to empower the Central Government to make rules. These rules will prescribe the conditions or restrictions for imposition of such levies by State Governments.(PIB,2026)
Source , (PIB,2026)
Emerging issues
As discussed above,the new amendment bill will restrict states from taxing minerals rights and mineral bearing lands,this provision is widely used to by states to raise their concerns regarding the encroachment on State powers under Entry 49 (taxes on lands and buildings) and Entry 50 (taxes on mineral rights) of the State List. Land being a state subject, the power of parliament for taxation of land under entry 49 is being questioned.
Another concern being pointed out is the conflict of the new law with the existing judicial interpretation.In July 2024, an 8:1 majority judgment by a 9-judge Constitution Bench of the Supreme Court in Mineral Area Development Authority v. Steel Authority of India upheld the legislative competence of States to tax mineral rights under Entry 50 and mineral-bearing lands under Entry 49 of the State List.The rights given to states to recover past tax dues is also to be noted.The bill is trying to invalidate certain unpaid taxes which raises concerns over separation of powers and legislative overreach.The Bill leaves the conditions and restrictions on State taxation to be prescribed by the Central Government.
Critics argue that Parliament should itself lay down clearer principles rather than leaving an important aspect of State taxation powers largely to the executive.The issue of cooperative federalism,higher centralisation of power,issues with states such as Odisha and Jharkhand are all being raised.Furthermore ,treating entities unequally regarding tax liabilities may violate Article 14 of the Constitution—Under the Bill, mining companies that had to pay any mining related dues are not required to pay them.
However, companies that have already paid such dues cannot recover them back. Thus, the Bill may be treating mining companies that had tax dues differently on grounds of whether they paid their dues or delayed such payments. This may violate Article 14 of the Constitution. It may be argued that the provision is arbitrary as it provides relief to persons who had not paid their liability, while denying similar relief to those who had complied with the law.
Way forward
India being a union of states,it’s important for both the center and state to go hand in hand for certain matters.Energy security being topmost priority of our country,the recently passed amendment of Mines and Minerals (Development and Regulation) Amendment Bill, 2026 should be studied and deliberated well to address the concern of states as well as for the policy to be most effective.Some possible means are the introduction of a centre state council to shape the mineral governance mechanism including the taxation, mining, protection etc.
There should be separate focus towards strategically and critically important minerals.Illegal mining is a major issue and technology like drones and GPS should be leveraged to address the same.There should be special focus on mineral rich states like Jharkhand,Odisha with an appropriate mechanism to compensate or share the gains from increased mining activity.The mission on critical minerals should be well sophisticated and made more effective along with the District Mineral Foundation.Minerals are present unevenly in the country with some states bearing the highest quantity of critical minerals,they should be given an upper hand owing to their strategic importance. Moreover the priority should always be sustainable mining.
As the world order is fast evolving and minerals finding themselves as means of soft power,the extraction and mining of the same in a developing country like India is of utmost importance.All possible means to address the concerns of states with respect to the recently passed act should be taken and center and state should co-operate together for a better and effective future.
Selected reference and important links
- MMDR Amendment Act, 2026,PIB(2026)
https://share.google/FiU9OeeBwv6Ic7jdj
- MMDR Amendment to bring long term Stability in Major Minerals Sector, Ministry of mines (2026)
https://share.google/FhiEs1AB7ZWS7mu59
- The Mines and Minerals (Development and Regulation) Amendment Bill, 2026,PRS ,2026
https://share.google/BKv56bHoex0a1UoCH
About The Contributor
The author is a postgraduate student of Political Science at Madras Christian College, Chennai.Her academic interests spanning International Relations, Diplomacy, International Political Economy, South Asian politics, Public Policy, Gender Studies, Climate Politics, Human Rights, Global Governance, and History.She is currently a research intern at IMPRI, New Delhi.
Acknowledgments
The author extends her sincere gratitude to the IMPRI team and Gouri Kodali for her valuable guidance throughout the process.
Disclaimer
All views expressed in the article belong solely to the author and do not necessarily represent the views or policies of the organisation.
Read More at IMPRI
Digital Agriculture Mission 2024: Building India’s Digital Farming Infrastructure
Agnipath Scheme (2022): Evolution, Implementation and Emerging Policy Challenges
