States, Parliament and the Mining Question

Why in News?

Parliament passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2026, seeking greater uniformity, transparency and predictability in mineral taxation across States.
The amendment has revived a constitutional debate over the respective powers of Parliament and States to regulate and tax mineral resources.

Mineral-producing States impose several taxes, cesses, royalties and other charges on mining.
For example, coal mined in Jharkhand and used for thermal power generation in Punjab may attract multiple charges in addition to the basic mine-site price.
In the example cited, coal priced at ₹1,148 per tonne attracted additional levies of about ₹1,139 per tonne, taking the total to ₹2,287 per tonne.
These included mineral land cess, royalty, District Mineral Foundation contribution, forest transit fee, IGST and National Mineral Exploration Trust contribution.

In Mineral Area Development Authority v. Steel Authority of India (2024), a nine-judge Constitution Bench, by an 8:1 majority, overruled the earlier India Cements v. State of Tamil Nadu (1989) judgment to the extent that it treated royalty as a tax.
The Court clarified that States have constitutional authority to tax mineral-bearing land under Entry 49 of the State List.
Entry 50 of the State List also permits States to impose taxes on mineral rights, subject to limitations imposed by Parliament relating to mineral development.
The Court distinguished taxation powers from Parliament's power over regulation and development of mines and minerals.

Entry 49, State List: Taxes on lands and buildings, including mineral-bearing land.
Entry 50, State List: Taxes on mineral rights, subject to limitations imposed by Parliament relating to mineral development.
Entry 54, Union List: Regulation of mines and mineral development to the extent Parliament declares such regulation and development to be under Union control.
The MMDR Act, 1957, is the principal legislation through which Parliament exercises its powers under Entry 54.

The amendment introduces restrictions on State taxation of mineral rights and mineral-bearing land.
It provides that States cannot impose specified taxes, cesses or other levies on mineral rights or mineral-bearing land except according to conditions or restrictions prescribed by the Central Government.
This raises a constitutional question: whether Parliament, using its power over mineral development under Entry 54, can restrict the State's independent power to tax land under Entry 49 merely because that land contains minerals.
The concern arises because the Supreme Court's 2024 judgment explicitly recognised State taxation powers over mineral-bearing land.

Multiple State-level levies can increase the cost of minerals and create uncertainty for mining companies.
Greater transparency and predictability could encourage investment and reduce dependence on imported minerals, including critical minerals and rare earth elements.
At the same time, States depend significantly on mineral revenues, particularly mineral-rich States.
Mining also creates environmental costs that vary according to the location and nature of individual mines, making some form of resource-based taxation necessary.

The article suggests using Article 252 to develop a consensual framework for mineral taxation.
Under Article 252, if two or more State legislatures pass resolutions requesting Parliament to legislate on a matter in the State List, Parliament can enact a law on that subject.
Other States can subsequently adopt that legislation through resolutions.
This mechanism has previously been used for legislation relating to water pollution.
A similar consensus-based approach could provide a more cooperative framework for mineral taxation while respecting federal principles.

The emerging carbon market also makes it necessary to account for the carbon costs associated with coal, petroleum and natural gas.
A coordinated institutional mechanism could improve transparency and resource management.
The article proposes considering a national regulator for mines, established with the consent and participation of States.