Last week, Parliament passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2026 that restricts states’ powers to impose levies on mineral rights and mineral-bearing lands. The Centre’s rationale for bringing the amendments is to provide greater certainty and predictability in the sector, facilitate investment flows and prevent higher levies from feeding into infrastructure costs. States have, however, expressed apprehension over the implications of the amendments for their revenues in particular, and for fiscal federalism in general.

The amendments come after the Supreme Court upheld the right of states to impose such taxes, and also allowed them to recover arrears going back to April 1, 2005. Following this, states have looked towards raising more revenue from the sector. For instance, some of them have reportedly brought in mineral-bearing land taxes on iron ore (Jharkhand had initially imposed the tax on iron ore at Rs 100 per tonne, which was hiked subsequently) and limestone (Tamil Nadu has set a tax of Rs 160 per tonne). States impose 14 types of taxes, charges, fees and levies such as royalty, auction premium etc. Across states, rates of royalty and taxes also vary. The changes in the law can also be seen as a bid to bring about some degree of uniformity in prices of major minerals.

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The rationalisation of taxes and royalties is a step towards facilitating greater investor interest in the sector. The effective tax rate in India is higher than 50 per cent of revenues while it is 35 to 40 per cent in other countries, according to a report on States’ Best Practices in Mining by FIMI-EY. But state governments, with limited avenues to raise resources, are worried about a further erosion of their tax powers — for mineral rich states like Odisha, Jharkhand and Chhattisgarh, revenue from this channel accounts for a significant share of their non-tax revenue. According to a government fact-sheet, “States will continue to receive the overwhelming share of mining revenue,” but friction between the Centre and states needs to be addressed. The Union government has launched a critical mineral mission. A more predictable mining framework would encourage greater investments in a sector that is vital for the growth of the country.