Sustainable Mining for a Developed India

Introduction

Drawing inspiration from Chanakya’s Arthashastra, the principle of levying taxes should be akin to how a bee collects honey from a flower—without harming the plant. This analogy aptly applies to India’s mining sector, which supports approximately 12.5 million livelihoods, with the coal industry alone employing over 2.5 million individuals. Mining not only fuels industries but also sustains numerous Indian households.

Contents

Regulatory Changes in Mining

To ensure a predictable and unified regulatory framework for this critical sector, significant amendments have been made to the mining regulatory landscape. This article examines the latest amendment to the Mines and Minerals (Development and Regulation) Act, 1957, specifically the MMDR Amendment Act, 2026. This amendment seeks to address the grievances of the mining industry, which has been burdened by numerous exorbitant taxes in addition to standard statutory mining levies.

Currently, the mining industry deals with around 14 different taxes, charges, and fees, including royalties, auction premiums, dead rent, DMF contributions, GST, and transit fees. Before the recent amendment, some states were imposing additional charges of up to 20 percent on mineral-bearing lands.

The MADA Case: Implications of Multiple and Retrospective Levies

The Supreme Court’s 9-Judge Bench decision in Mineral Area Development Authority v. Steel Authority of India (2024) 10 SCC 1, commonly referred to as the MADA Case, effectively restored the states’ authority to levy taxes in addition to other mining levies. This ruling overruled a previous 7-Judge Bench decision in India Cement Ltd. v. State of Tamil Nadu (1990) 1 SCC 12.

The Bench interpreted List I Entry 54 and List II Entry 50 of the Seventh Schedule, stating that since Parliament had not imposed any limitations under the MMDR Act, the states’ power to levy taxes on mineral rights remained unaffected. However, Parliament retains the authority to impose any limitations on state powers under List I Entry 54.

The MADA decision was applied retrospectively from April 1, 2005, to July 25, 2024. This retrospective application significantly impacted the financial and operational aspects of the mining sector, with increased raw material prices and production costs being passed on to consumers.

State Levies and Their Impact

The retrospective application resulted in pending levies from 2005 to 2024, coupled with new taxes and levies imposed by states after July 25, 2024. This unregulated tax landscape across states affected the viability of mining operations, leading to higher costs across the industry. Coal India Ltd, for instance, paid around 7,000 crores in FY 25-26 due to various state levies.

The Need for a Unified National Market

India’s mineral resources, concentrated in a few states, play a crucial role in supporting the national economy. A fragmented tax regime hinders the functioning of a unified national market. The compounding regional levies inevitably burden end consumers with higher costs for electricity, housing, and other goods and services, impeding economic integration.

This tax disparity also undermines the “One Nation, One Market” framework, making domestic manufacturing less competitive against foreign counterparts. Consequently, unpredictable state-level tax variations deter private investments, adversely affecting the sector’s growth and leading to potential job losses.

MMDR Amendment Act, 2026

To ensure predictability and uniformity, Parliament enacted the MMDR Amendment Act, 2026, restricting state governments from levying taxes on mineral rights and mineral-bearing lands beyond conditions prescribed by the Central Government. States cannot recover any taxes or levies not previously collected before the amendment.

Despite these changes, states continue to receive significant mining revenue from auction premiums, royalties, and other levies. The amendment does not affect the control of 50 minor minerals by state governments.

Conclusion: Towards a Developed India

Achieving regulatory stability is essential for realizing the vision of a developed India (Viksit Bharat). The MMDR Amendment Act, 2026, fosters a stable and transparent mining environment, attracting investments and technological advancements. Such stability ultimately benefits society by ensuring systematic and sustainable development.

India’s mineral resources, akin to the oil reserves of the Gulf States, hold substantial potential for economic development. For this potential to be harnessed, a stable tax structure is crucial, encouraging long-term capital investments and technological growth.

As an industry that thrives on predictability, the mining sector requires a uniform tax structure to instill investor confidence and ensure sustainable growth.