The MMDR (Amendment) Bill, 2026 restricts states' power to tax mineral rights. Discuss its implications for fiscal federalism in India in light of the 2024 Supreme Court judgment.

In Mineral Area Development Authority v. Steel Authority of India (2024), a nine-judge Bench held by 8:1 that royalty is not a tax, affirming states' power to levy taxes on mineral rights and mineral-bearing land [3]. The MMDR (Amendment) Bill, 2026 substantially curtails that power, reopening the Centre–State fiscal question the verdict had settled.

What the 2024 verdict established

• Royalty flows from contractual conditions of a mining lease, not from the taxing power; India Cement (1990) stood overruled [3].
• States drew independent competence from Entries 49 and 50 of the State List, subject to Parliament's limiting power over mineral rights alone [1][3].

How the Bill shifts the balance

• New Section 9D bars any state tax, cess or levy on mineral rights or mineral-bearing lands — whether based on quantity, value or royalty — except on conditions prescribed by the Centre [2].
• The Union will now regulate "mineral-bearing lands", identified per central parameters, widening jurisdiction beyond mines [2].
• State dues unpaid at commencement are deemed invalid, while amounts already recovered are not refundable [2].

Implications for fiscal federalism

• Erosion of autonomy: mineral-rich states like Jharkhand and Odisha lose a buoyant own-source revenue stream, deepening vertical fiscal imbalance [1].
• Constitutional friction: Parliament may restrict Entry 50, but taxing land under Entry 49 is a traditional state domain — inviting fresh litigation [1].
• Delegation and equity concerns: open-ended rule-making power for the Centre, and unequal treatment of states that collected dues versus those that did not [1].
• Countervailing gains: a uniform levy regime lowers cost uncertainty, aiding exploration investment and critical mineral security [2][4].

Cooperative federalism requires that fiscal predictability for investors not come at the cost of states' revenue rights. A negotiated route — compensating states through higher royalty shares and GST Council-style consultation in the Ministry of Mines' rule-making — would secure both mineral self-reliance and the federal balance the Constitution envisages [5].