States Response over the Mining Amendment

Why in News?

The Mines and Minerals (Development and Regulation) Amendment Act, 2026 has triggered a fresh Centre-State debate over mining regulation, taxation powers and fiscal federalism.

What are the Key Provisions of the Amendment?

• Centre powers – The Centre’s regulatory powers have been expanded to cover mines, mineral development and mineral-bearing lands.
• State powers – States are restricted from imposing new taxes on mineral rights and mineral-bearing lands, except as permitted by the Union government.
• Certain uncollected mineral-related taxes imposed before the amendment are rendered invalid.
• This can reduce the future mineral-linked revenue available to mineral-rich States.
• Constitutional Framework – Mining and mineral taxation involve overlapping constitutional powers –
  • Entry 23, State List – States can regulate mines and mineral development, subject to Union legislation.
  • Entry 54, Union List – Parliament can regulate mines and mineral development in the public interest.
  • Entry 50, State List – States can tax mineral rights, subject to limitations imposed by Parliament.
  • Entry 49, State List – States can tax lands and buildings, including mineral-bearing land.
• Thus, the amendment has expanded the Centre-State debate from regulation of mineral development to the fiscal autonomy of States.
• Supreme Court's Position – The Supreme Court’s 2024 judgment held that
  • States possess the power to tax mineral rights, subject to Parliament’s power to impose limitations in public interest.
  • Parliament cannot use its powers under Entry 54 to curtail the State’s power to tax mineral-bearing land.
  • The 2026 amendment has therefore raised questions about its compatibility with the constitutional distribution of powers.

Why is the Issue Important for States?

• Impact on Fiscal Autonomy – Mineral-rich States depend significantly on mineral-related receipts.
  • Jharkhand and Odisha - Mineral receipts constitute around 80% of non-tax revenue.
  • Karnataka - Around 48%.
  • Madhya Pradesh - Around 41%.
  • Rajasthan - Around 39%.
  • Chhattisgarh - Around 6%.
  • Telangana - Around 11%.
• Therefore, the fiscal impact of the amendment varies considerably across States.
• Impact on Welfare Expenditure – States may use mineral revenues to finance, Social-security programmes, Infrastructure, Local development.
• For instance, Jharkhand has argued that loss of mineral-tax revenue could affect social-security programmes.
• Federalism Concerns – States challenging the law argue that restrictions on their taxation powers could weaken –
  • Fiscal federalism
  • State autonomy
  • Constitutional division of taxation powers
  • Cooperative federalism.

Why are States Responding Differently?

• Economic Factors – States with greater dependence on mineral revenues have a stronger direct fiscal stake in the issue.
  • Jharkhand has raised concerns over revenue losses.
• Political Alignment – Political alignment between the Centre and State governments can influence whether fiscal concerns become an organised Centre-State federal dispute.
  • Karnataka, Telangana, Himachal Pradesh and Kerala are planning legal challenges.
• Others – Odisha presents a mixed response, with the Opposition demanding a special Assembly session while the State government has rejected the demand.
  • Madhya Pradesh, Rajasthan and Chhattisgarh have not launched comparable State-government challenges so far.
  • Thus, material economic interests and political factors interact in shaping State responses.

What are the Challenges to Cooperative Federalism?

• Unclear legislative powers – Overlapping legislative powers can create jurisdictional disputes.
• State limitations – Central restrictions may be perceived as reducing State fiscal space.
• Mixed political opinions – Different political alignments can make federal negotiations more difficult.
• Increased dependence on centre – Excessive dependence on transfers can weaken States’ bargaining capacity.
• Cascading levies – Multiple State-level mineral levies can also increase costs for industries, as argued by the Centre.

What can be Improved?

• Constitutional clarity – Ensure that the amendment respects the federal distribution of legislative and taxation powers.
• Centre-State consultation – Institutionalise consultation with mineral-rich States before major changes.
• Cooperative fiscal framework – Develop mechanisms that protect State revenues while avoiding excessive and overlapping levies.
• Transparent revenue-sharing – Ensure predictable compensation or alternative revenue mechanisms where State revenues are affected.
• Judicial resolution – Constitutional questions should be settled through an authoritative judicial interpretation.
• Strengthen institutions – Use the Inter-State Council, GST Council and Finance Commission mechanisms to facilitate dialogue on broader fiscal federal issues.

What lies ahead?

• The mining amendment illustrates the continuing push and pull between Union authority and State autonomy in India.
• The key challenge is to balance the Centre’s objective of creating a predictable and competitive mineral regime with the States’ constitutional and fiscal interests.
• A consultative and constitutionally grounded approach is essential to preserve both economic efficiency and cooperative federalism.

Reference

The Hindu| Why are States divided over the mining amendment?