Overview
India’s mineral wealth is concentrated in a few states such as Odisha, Jharkhand, Chhattisgarh and Karnataka. While mining creates jobs and attracts investment, it also brings displacement, environmental damage and heavy public‑expenditure burdens on the host states. The MMDR 2026 seeks to standardise the fiscal regime by inserting Section 9D. The provision has sparked a debate on fiscal federalism and the constitutional balance of power.
Key Developments
- Section 9D prohibits state governments from imposing any tax, cess or levy on mineral rights or mineral‑bearing land unless the Central government issues a specific permission.
- The Centre argues that a uniform tax environment will attract long‑term mining investment and avoid unpredictable fiscal changes.
- States contend that the amendment curtails their ability to raise revenue from a natural economic advantage.
- In 2024, the Supreme Court 2024 judgment held that royalty is a fee, not a tax, and confirmed the states’ power to tax mineral rights and mineral‑bearing land under the Constitution.
Important Facts
The Constitution places the power to tax mineral rights under Entry 50 and the power to tax land and buildings under Entry 49. While Parliament may impose reasonable limits, Section 9D extends those limits to land‑based levies, raising the question of how far a central law can restrict a state’s exclusive taxation power. royalty and auction premiums currently form a large share of state revenues; the Centre claims that 90 % of mining sector revenue already accrues to states and will continue to do so.
According to Fiscal Health Index, Odisha and Chhattisgarh rank high because of mining receipts, which also fund the extra public spending required in mineral‑producing districts.
Exam Relevance
This amendment touches upon three core UPSC themes:
- Federalism and Centre‑State Relations (GS2): The tension between constitutional taxation powers and central legislative limits.
- Economic Policy and Revenue Mobilisation (GS3): Impact of mining royalties, auction premiums and potential loss of future levies on state finances.
- Environmental and Social Costs (GS3 & GS4): States bear the burden of displacement, ecological damage and infrastructure strain, underscoring the need for fiscal compensation.
Way Forward
For a balanced approach, policymakers could consider:
- Creating a transparent, time‑bound framework where the Centre authorises state levies only after a cost‑benefit analysis.
- Ensuring a minimum share of mining‑related revenue remains with the host state to fund rehabilitation and infrastructure.
- Strengthening the role of the Supreme Court in interpreting the constitutional limits to avoid legislative overreach.
Only by aligning investment certainty with fiscal autonomy can India achieve sustainable mining growth while respecting its federal structure.