Why are States divided over the mining amendment?

1. At a Glance

• The Mines and Minerals (Development and Regulation) Amendment Act, 2026, passed by Parliament, gives the Centre power to regulate mineral-bearing lands as well as mines and mineral development [1][2].
• It bars States from imposing new taxes, cesses or levies on mineral rights and mineral-bearing lands unless they follow conditions set by the Union government [1][2].
• The dispute is no longer only about who regulates mining. It is about how much fiscal autonomy mineral-rich States have, and it tests cooperative federalism [1].
• States have not reacted the same way. Their positions depend on how much they rely on mineral revenue and on their political alignment with the Centre [1].

2. Why in the News

• Parliament passed the MMDR Amendment Act, 2026, and The Hindu analysed the States' split responses on 6 October 2026 [1][3].
• The law cuts back the taxing powers that the Supreme Court confirmed for States in July 2024, in Mineral Area Development Authority v. Steel Authority of India [9][11].
• Opposition-ruled States, Congress-ruled States among them, have protested. Congress-ruled States have announced a joint challenge in the Supreme Court [8][10].

3. Background & Evolution

• 1989 – India Cement judgment: the Supreme Court treated royalty as a tax. This limited how far States could levy taxes on minerals [11].
• July 2024 – MADA v. SAIL: a nine-judge Constitution Bench ruled 8:1 that royalty is not a tax and overturned India Cement [9][11].
• Royalty is a contractual payment made in return for enjoying mineral rights [11].
• Under Entry 50, List II, States can tax mineral rights [9][11].
• Under Entry 49, List II, States can tax mineral-bearing land, including on the basis of mineral yield or value [9].

• The MMDR Act, as it then stood, placed no limits on these powers. However, Parliament could later restrict or prohibit them through a law on mineral development [9].

• January 2025: the Centre said it would take up high mining taxes in consultations with States [12].

• 2026: the Centre introduced the MMDR Amendment Bill, 2026, which used the Entry 54 route to limit State levies. It was then enacted [2][3][4].

4. Core Static Facts

5. Multi-Dimensional Analysis

Legal / Constitutional

• The Act relies on Entry 54, List I to limit State powers under Entries 49 and 50, List II [1].
• The MADA judgment itself said Parliament could impose limits, so the Centre's legislative competence is arguable [9].
• The retrospective invalidation of pending dues is likely to be the most contested part in court [2][10].
• Business Standard reports that the amendment puts State taxing powers back under constitutional scrutiny [9].

Economic

• The Centre's case, from the Statement of Objects and Reasons, rests on five problems [2]:
• a heavy tax burden on the mining sector;
• unpredictable levies introduced after mining has begun;
• multiple levies on the same production or dispatch;
• rates that differ from State to State;

• retrospective imposition of levies.

• Jharkhand estimates it could lose ₹8,000–10,000 crore a year in revenue [6].

• A Business Standard editorial argues the Bill puts business ahead of States' rights [13].

Federalism / Governance

• Kerala's Chief Minister has warned that the amendments could erode States' fiscal autonomy [7].
• States describe the change as a central "turf grab" [8].
• Because the Centre alone sets the parameters for "mineral-bearing land", it effectively controls the size of the States' tax base [2].

Social / Tribal

• Down To Earth reports that the law cuts off money Jharkhand needs for the welfare of its own people in mining-affected areas [6].

Political

• States are split along two lines [1]:
• Revenue dependence: mineral-rich States lose more.
• Political alignment: opposition-ruled States are mounting a joint legal challenge [10].

6. Recent Developments (last 12–18 months)

• January 2025: the Centre plans to raise high mining taxes in consultations with States [12].
• 2026: the PRS and PIB factsheets document the Bill's progress [2][4][14].
• The Bill is introduced.

• It restricts State levies and voids pending dues.

• August 2026 (Business Standard reports):

• States protest the Bill, and Mines Minister Reddy defends it [8].
• The Kerala CM raises fiscal-autonomy concerns [7].

• Business Standard publishes a critical editorial [13].

• 2026: Parliament enacts the Bill; PIB publishes a factsheet on the Act [3].

• 2026: Congress-ruled States decide to jointly challenge the Act in the Supreme Court [10].
• 6 October 2026: The Hindu analyses why States are divided [1].

7. Prelims Hooks

• Under the MMDR Amendment Act, 2026, the Centre regulates "mineral-bearing lands" [2].
• "Mineral-bearing land" is defined using parameters prescribed by the Central Government [2].
• The Act bars new State taxes on mineral rights and mineral-bearing land unless they meet Union conditions [1].
• State mineral levies that were not fully collected before the Act came into force are cancelled [1][2].
• Entry 23, List II: regulation of mines and mineral development, subject to Union law [1].
• Entry 54, List I: Union regulation of mines and minerals in the public interest [1].
• Entry 49, List II: taxes on lands and buildings, which includes mineral-bearing land [1][9].
• Entry 50, List II: taxes on mineral rights [1][11].
• MADA v. SAIL (2024) was decided by a nine-judge bench by an 8:1 majority [9][11].
• MADA v. SAIL held that royalty is not a tax [11].
• MADA v. SAIL overruled India Cement (1989) [11].
• Dead rent is also not a tax [11].
• Jharkhand estimates its loss at ₹8,000–10,000 crore a year [6].

8. Why the Real Fight Is Over Old Dues, Not Future Taxes

• The Supreme Court had already allowed States to collect old taxes going back to 2005
• In August 2024, the Court let States recover mineral taxes due from 1 April 2005 onwards [15].
• It made this easier on companies. Payment was spread over 12 years, starting 1 April 2026, and interest and penalties from before 25 July 2024 were waived [15].

• The mining industry put these arrears (old unpaid dues) at about ₹1.5 trillion, or ₹1.5 lakh crore [16].

• The Act cancels this money almost as soon as States could start collecting it

• The first instalment was due only in April 2026. So most of the arrears were still unpaid in 2026, when the Act declared all unpaid State levies invalid [1][2][15].
• Jharkhand alone says it is owed ₹1.36 lakh crore from April 2005 onwards [6].

• So for a mineral State, the old dues lost are far larger than any single year of future tax lost.

• Firms that paid lose out, and firms that delayed gain

• Dues that are still unpaid are cancelled. Dues already paid are not refunded [14].
• PRS says this may break Article 14 (the right to equal treatment under law). Two companies with the same liability end up in different positions only because one paid on time [14].
• The law ends up rewarding the firms that held back payment.

9. Where the Centre's Legal Case Is Weakest

• Parliament may limit taxes on mineral rights, but perhaps not taxes on land
• In MADA, the Court said Parliament's law on mineral development can limit State taxes on mineral rights (Entry 50, List II) [14].
• PRS reads the judgment as saying this power does not extend to State taxes on land (Entry 49, List II) [14].

• The Act limits both. Its hold over "mineral-bearing land" is the part where Parliament's legislative competence (its constitutional power to make that law) is most in doubt [14].

• The Act tells States to follow the Centre's conditions but does not say what those conditions must be based on

• States can tax only "in accordance with conditions or restrictions prescribed by the central government" [14].
• The Act gives no guiding principles for those conditions [14].
• Courts call this excessive delegation: Parliament hands a core decision to the government without setting limits. PRS flags this risk [14].

• The Centre also sets the parameters that decide what counts as mineral-bearing land [2]. So the government, not Parliament, decides both how big the tax base is and how much of it States may tax.

• Why this matters for the Supreme Court case

• The joint challenge by Congress-ruled States [10] is likely to rest on these three PRS points: Entry 49, Article 14 and excessive delegation.
• If the Court strikes down the Entry 49 part alone, the Centre's control over mineral rights may survive while its control over mineral land falls.

10. Why Jharkhand Feels the Loss More Than Most States

• For Jharkhand, mining money is most of the money it raises itself
• Mining made up 85% of Jharkhand's own non-tax revenue in 2024-25. In 2018-19 it was 71.9% [6].
• The State holds about 40% of India's mineral resources: coal, iron ore, copper and bauxite [6].

• Jharkhand estimated that a cess on mineral-bearing land alone could raise ₹7,110 crore a year. That is the tax the Act now blocks [6].

• The loss falls on welfare schemes, not just on the budget

• Down To Earth names three schemes at risk: the Mukhyamantri Maiyya Samman Yojana (over 50 lakh women benefit), the Abua Awas housing scheme and local pensions for the poor [6].

• A State with a small tax base and a heavy dependence on mining cannot easily replace this money from other taxes.

• This explains the split better than politics alone

• A State that earns little from minerals loses mainly a principle when its taxing power shrinks.
• A State like Jharkhand loses a large part of its own revenue, plus lakh-crore arrears [6].
• So two States can both oppose the Act, but for different reasons and with very different stakes. Kerala objects on fiscal autonomy (a State's freedom to raise and spend its own money) [7]. Jharkhand objects on survival of its schemes [6].

11. The Centre's Strongest Argument — and Where It Overreaches

• The strongest case for the Act: investors need one predictable tax system
• The Centre lists real problems: levies added after mining has started, several levies on the same output, and rates that differ from State to State [2].
• The Centre argues that uniform tax lowers investment risk and keeps costs down for critical minerals like lithium, which India needs for the energy transition (the shift away from coal and oil) [6].
• The 2024 ruling did hurt mining firms. Moody's said it would hit their profits [17], and the arrears ran to about ₹1.5 lakh crore [16].

• What is right about this: a miner should not face a new tax years after signing a lease. Rates that differ across 28 States do make planning hard.

• Why the answer still falls short

• The problems the Centre lists are about future taxes. But the Act also wipes out past dues [2]. The Court had already softened those with a 12-year payment plan and no interest [15].
• Uniformity could be reached with a cap or a common rate band. The Act instead lets the Centre alone set the conditions, with no principles written into the law [14].
• The Centre itself had planned to settle high mining taxes through consultation with States in January 2025 [12]. Moving to a law that overrides them weakens the cooperative federalism the Centre says it supports [1].

12. What a Fairer Settlement Could Look Like

• Parliament should write the limits into the Act itself
• PRS warns that the Act gives the Centre power without guiding principles [14].

• Parliament could set a maximum rate, or a rate band, for State levies in the law. Both investors and States would then know the ceiling in advance.

• The Ministry of Mines should keep Entry 49 out of the Act's reach

• PRS reads MADA as giving Parliament no power over State land taxes under Entry 49 [14].

• Leaving land taxes with States would remove the weakest legal part of the Act before the Court has to rule on it.

• The Centre should respect the Court's 12-year payment plan, not cancel the dues

• The Supreme Court had already balanced the two sides: dues from 2005, paid slowly, with interest waived [15].

• Keeping that plan would also end the unfairness between firms that paid and firms that did not, which PRS flags under Article 14 [14].

• The Ministry of Mines should go back to the consultation it promised in January 2025

• The Centre had said it would raise high mining taxes with States [12].
• Any rate limit agreed jointly with States is less likely to be struck down, and less likely to split States, than one set by the Centre alone.

13. Anchors for Answers

• Data: Mining was 85% of Jharkhand's own non-tax revenue in 2024-25, up from 71.9% in 2018-19 [6]
• Data: Jharkhand says it is owed ₹1.36 lakh crore in mineral tax arrears since April 2005 [6]; industry-wide arrears put at about ₹1.5 lakh crore [16]
• Data: Jharkhand's estimated cess on mineral-bearing land: ₹7,110 crore a year [6]
• Report/Committee: PRS, MMDR Amendment Bill, 2026: Issues for Consideration (2026), which flags Entry 49 competence, Article 14 and excessive delegation [14]
• Law/Case: MADA v. SAIL (2024): royalty is not a tax [11]; follow-up order allowed recovery from 1 April 2005 over 12 years from April 2026, with interest waived [15]; Article 14 (equal treatment) [14]
• Scheme: Mukhyamantri Maiyya Samman Yojana (Jharkhand, 50 lakh+ women), funded partly by mining revenue now at risk [6]

14. Mains Relevance

• GS-II: federalism; distribution of legislative powers; issues in the federal structure; role of the Supreme Court.
• GS-III: mobilisation of resources; the mining sector; infrastructure and investment.
• Possible questions: 1. The MMDR Amendment Act, 2026 revives the Centre–State tussle settled in MADA v. SAIL. Examine it in light of Entries 49 and 50 of List II and Entry 54 of List I. (15 marks) 2. Is it possible to keep the tax regime for the mining sector predictable while respecting the fiscal autonomy of mineral-rich States? Discuss. (15 marks) 3. Why do responses to central legislation vary among States? Illustrate with the recent mining amendment. (10 marks)

15. Related Topics to Study Next

• Seventh Schedule and Article 246: the legal basis for the Union–State split of powers.
• MADA v. SAIL (2024) and India Cement (1989): the case law the amendment builds on.
• District Mineral Foundation and PMKKKY: welfare funds for mining-affected areas, linked to Jharkhand's concerns.
• GST and fiscal federalism: an earlier case where States gave up taxing powers.
• Finance Commission devolution: how dependent mineral States are on transfers.
• Critical minerals mission and MMDR amendments of 2015, 2021 and 2023: the earlier reform path.
• Fifth Schedule and PESA: tribal rights in mineral-rich areas.

16. NCERT Concepts to Revise

• Seventh Schedule (Polity): The dispute turns on Entries 23, 49, 50 and 54 of the Union and State lists under Article 246.
• Federalism (Polity): The Act shifts power between Centre and States, so understanding India's federal design explains the dispute.
• Fiscal federalism (Economy): States' loss of taxing power over mineral rights and land is the core fiscal autonomy issue.
• Cooperative federalism (Polity): The note says the Act tests Centre–State partnership and consultation, which this model describes.
• Constitution bench (Polity): The 2024 MADA v. SAIL ruling came from a nine-judge bench and underpins the whole dispute.
• District Mineral Foundation (Geography): This fund for mining-affected people links to Jharkhand's welfare-funding concerns and mining revenue sharing.

17. Common Errors / Trap Areas

• The Union entry is Entry 54, List I. The State regulatory entry is Entry 23, List II. Do not swap them [1].
• Entry 49 covers taxes on land. Entry 50 covers taxes on mineral rights. Do not mix them up [1][9].
• In MADA, the bench had nine judges and the majority was 8:1. It was not a five-judge bench, and the decision was not unanimous [11].
• MADA upheld State competence, but it also recognised that Parliament could limit it. The amendment does not directly "overrule" the Court [9].
• The Act does not take away States' rights over minor minerals, according to the Minister [8].