What does the new mining law say?

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In August, Parliament passed the Mines and Minerals (Development and Regulation) Amendment Act, 2026. The amendments seek to restrict states from imposing specified levies on mineral rights and mineral-bearing land.

The law will also extinguish unpaid or unrecovered dues arising from such levies imposed before it comes into force, with some estimates putting the value of such outstanding dues across the mining sector at around Rs 2 lakh crore. 

According to the government, the amendments were needed because excessive state-level levies could raise the cost of key minerals, feeding into inflation and infrastructure costs.

So what’s the controversy?

These amendments override the key financial aspects of a landmark 2024 Supreme Court ruling ruling that opened the door for states to raise additional revenue from mining.

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The ruling, on July 25, 2024, upheld states’ exclusive power to tax mineral rights and mineral-bearing lands. The ruling also waived interest and penalties on tax demands for the period before July 25, 2024, and allowed the payment of such dues to be staggered over 12 years from April 1, 2026.

The judgment overruled a 1989 ruling, India Cement Ltd v. State of Tamil Nadu, which had held that royalty was a tax and that states lacked the legislative competence to tax mineral rights, as the subject fell under the Union List. 

Tamil Nadu and Jharkhand have already imposed such levies , called mineral-bearing land (MBL) taxes. In Jharkhand, the MBL tax on iron ore was initially set at Rs 100 per tonne and later raised to Rs 400 per tonne. Tamil Nadu has imposed an MBL tax of Rs 160 per tonne on limestone. Karnataka, too, has proposed a similar tax on non-auctioned iron ore mines. 

The new law would, therefore, lead to a significant revenue shortfall for states.

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Indeed, the passage of the Act drew sharp opposition from states. Jharkhand Chief Minister Hemant Soren has said it could significantly dent the state’s prospective revenue, while Kerala Chief Minister V D Satheesan has raised concerns over their implications for India’s federal structure.

How much could states lose?

The dependence on mineral revenues is particularly significant for mineral-rich states. According to a Comptroller and Auditor General of India report on state finances, states’ own non-tax revenue stood at Rs 3.3 lakh crore in 2024-25, of which 41% — or Rs 1.36 lakh crore — came from receipts related to mineral and petroleum.

While these minerals and petroleum receipts accounted for a mere 3.4% of all states’ revenue receipts, for mineral-rich states, the proportion was much larger: 23% for Odisha, 13% for Jharkhand, and 5% for Chhattisgarh.

Jharkhand CM Soren had said mining revenue accounted for approximately 84.9% of the state’s own non-tax revenue in 2024-25. Soren claimed the Mineral Bearing Land Cess, which the state has been imposing on mining companies, was expected to generate approximately Rs 11,000 crore annually.

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Meanwhile in Odisha, the BJD alleges that the new law could cost the state Rs 12,000 crore in annual losses and Rs 1 lakh crore in arrears.

Prabhat Ranjan, Senior Director at Nexdigm, a global consulting and advisory firm specialising in tax, regulatory, risk, governance, and business advisory, had said the amendments would, in effect, serve as a cost-containment and investment-certainty measure for mining companies, but concerns over potential revenue loss for states cannot be brushed aside.

Why the government is backing the law

In August, a senior official at the Mines Ministry said that there are around 14 levies in the mineral sector and these levies will continue to be there. “All we are saying is all these levies together should not be beyond a certain percentage,” a senior ministry official said, adding that this percentage will only be decided after consultation with all the states.

B K Bhatia, mining industry expert and former Director General of the Federation of Indian Mineral Industries (FIMI), had told in August that the amendments would help prevent states from imposing multiple and excessive levies on mining companies.

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According to him, while the amendments will help the mining industry by providing greater certainty over the fiscal burden, they are unlikely to result in any material revenue loss for states, as most of these levies have been legally contested for decades, resulting in large amounts of pending dues.