MMDR Amendment Act 2026: Section 9D, Royalty and the Limits on State Mineral Taxes

MMDR Amendment Act 2026: What Parliament Changed in August

What Is the MMDR Amendment Act 2026: Section 9D Explained

Section 9D is where the change lies. It takes away the States' freedom to add new levies on minerals, a freedom the Supreme Court had confirmed in 2024, and leaves it to the Centre to set the conditions on which any such levy may be imposed. The Centre calls the result a uniform and balanced fiscal framework for mining; the mineral-rich States call it an attack on their taxing powers.

• New Section 9D: No tax, cess or other levy, by whatever name called, may be imposed by a State on mineral rights or mineral-bearing lands, whether it is based on mineral quantity, mineral value, royalty or any other basis, except as the Centre’s conditions allow.
• Wider reach in Section 2: The words “and mineral-bearing land” are added after “regulation of mines”, so the Union’s control extends to the land that holds minerals, not only to the mines.
• Past levies: Any State levy not paid or collected before the amendment applies is treated as invalid, but amounts already deposited or recovered are not refunded.
• Rules under Section 13: The Central Government gets the power to make rules prescribing the conditions under which States may impose such levies.

Is the MMDR Bill Passed? Passage Without Debate and Presidential Assent

The MMDR Bill was passed and is now law. The Ministry of Mines put its proposals out for public consultation on 1 January 2026. In the Monsoon Session, Coal and Mines Minister G. Kishan Reddy introduced it, arguing that divergent State levies had created uncertainty and could raise costs, encourage imports and undermine domestic supply chains; RSP member N.K. Premachandran opposed its introduction as being against federalism.

• Lok Sabha, 12 August: Passed without a debate, amid Opposition protests, with Jagdambika Pal in the Chair.
• Rajya Sabha, 13 August: Passed after the Opposition’s demand for a Parliamentary Standing Committee was declined and Chairman C.P. Radhakrishnan rejected a notice to disallow the Bill.
• Assent: The Bill became an Act on receiving the assent of President Droupadi Murmu.

Who Can Tax Minerals: The Seventh Schedule and the Courts

Entry 54 of List I and Entries 23, 49 and 50 of List II

Mining sits in both the Union List and the State List, which is why the question of who may tax it keeps returning to the courts. Regulation of mines and mineral development is Entry 54 of List I and Entry 23 of List II, and the State entry is subject to the Union entry. Parliament made the required declaration in Section 2 of the MMDR Act, which states that it is expedient in the public interest for the Union to take the regulation of mines and the development of minerals under its control.

Is Royalty a Tax? The Nine-Judge MADA Ruling of July 2024

Royalty is not a tax. That was the central holding in Mineral Area Development Authority v. Steel Authority of India, decided by a nine-judge Bench on 25 July 2024: royalty is a contractual consideration that a mining lessee pays the lessor for enjoying mineral rights. The ruling overruled India Cement Ltd. v. State of Tamil Nadu, in which a seven-judge Bench had held royalty to be a tax and denied the States the power to tax mineral rights.

• States hold the taxing power: The power to tax mineral rights vests in the State legislatures; Parliament cannot tax mineral rights under Entry 54, which is a general entry.
• Parliament may limit it: Under Entry 50, Parliament can impose “any limitations”, wide enough to include restrictions, conditions, principles and even a prohibition, but the MMDR Act as it then stood imposed none.
• Land is separate: States can tax mineral-bearing land under Entry 49, using the quantity of mineral produced or the royalty as the measure, and limitations imposed under Entry 50 do not operate on Entry 49.

The August 2024 Order: Arrears From 2005 in Twelve-Year Instalments

After the July ruling, the mining companies and the Centre asked the Court to apply it only for the future, since India Cement had held the field for thirty-five years. On 14 August 2024 the Court refused to make it prospective but softened its effect on the past.

1. States could levy or renew tax demands under Entries 49 and 50, but not on transactions made before 1 April 2005.
2. The demands were to be paid in instalments over twelve years, beginning on 1 April 2026.
3. Interest and penalty on demands for the period before 25 July 2024 were waived for all assessees.

These dates explain the timing of the 2026 Act. The first instalments could have been collected from 1 April 2026, and the Act now treats every levy not collected before it came into force as invalid.

Federal Supremacy and Harmonious Construction in the MADA Case

Two principles that courts use to settle conflicts over legislative power run through the case. The principle of federal supremacy comes from Article 246: in an inevitable conflict, Parliament's power over a List I subject prevails over a State's power over a List II subject. It cannot be invoked unless the conflict between the entries is direct and irreconcilable.

Harmonious construction is the duty to read overlapping entries so that both can operate and neither is reduced to a dead letter. The majority's reasoning in MADA reflects both: it read Entries 49 and 50 as distinct fields, held that Parliament cannot acquire the States' taxing power under the guise of a regulatory entry, and said federal supremacy does not apply where there is no direct conflict.

What the MMDR Act Means for State Revenue

Royalty, Auction Premium, DMF and the Other Mining Levies

States already collect most of what mining pays. By the Centre's count, they impose around 14 taxes, charges and fees on mining, including royalty, auction premium, dead rent, payments to the District Mineral Foundation, GST and transit fees, and some had begun taxing mineral-bearing land at rates as high as 20 percent.

• Share: Nearly 90 percent of mining-sector revenue accrues to the States.
• Major mineral States: Over Rs 5 lakh crore accrued to them between 2015-16 and 2025-26, against about Rs 82,000 crore to the Centre.
• Auction premium: A source created by the 2015 auction regime; major mining States collected more than Rs 96,000 crore of it between 2020-21 and 2025-26.
• One consignment: At an average sale price of Rs 3,000 a tonne of iron ore, the mining company pays Rs 3,150, of which Rs 3,016 goes to the State.

These figures are the Centre's case that States lose little. The States' answer is that the Act removes a source the Supreme Court had just confirmed, and the arrears that came with it.

Minor Minerals and District Mineral Foundations Stay With the States

Minor minerals are building stones, gravel, ordinary clay, ordinary sand other than sand used for prescribed purposes, and any other mineral the Central Government declares to be a minor mineral by notification (Section 3(e)). The definition is the Centre's to extend; the regulation is the States'.

• Rules for minor minerals: Under Section 15, State governments make the rules for quarry leases, mining leases and other concessions for minor minerals, and Sections 5 to 13 do not apply to them.
• Untouched by the 2026 Act: Nearly 50 minor minerals, including sand, gravel, clay, silica, granite, marble, gypsum and laterite, remain completely under State control.
• District Mineral Foundation: Under Section 9B, the State government sets up this non-profit trust in every district affected by mining-related operations, to work for the interest and benefit of persons and areas affected by mining.

Mineral Revenue of the States: Who Mines and Who Collects

Mineral wealth is concentrated, so the Act's cost falls on a few States. In 2024-25, about 97.70% of the value of mineral production (excluding atomic, fuel and minor minerals) came from eight States.

Odisha produced minerals valued at Rs 67,955.89 crore, the highest of any State, and mining accounts for 37.59% of its projected State revenue in 2026-27. Jharkhand holds about 40% of the country's total minerals. Both are among the States leading the challenge to the Act.

Their revenue has grown with the auctions. Since 2014, revenue to States from mineral production has grown by 354 percent, and they have received more than Rs 7 lakh crore, including coal. Major mineral States received Rs 13,586.16 crore in 2013-14 and Rs 82,366.19 crore in 2025-26; in coal, the States' share of revenue rose from 55.6 percent in 2014-15 to 89.5 percent in 2025-26.

MMDR Act Debate: Uniform Mineral Taxation Against Fiscal Federalism

The Centre's Case: Uniformity, Imports and Critical Minerals

The Centre argues that mineral wealth lies in a few States but supports the whole national economy, so its taxation is a national question. Uneven State levies, it says, make Indian minerals dearer than imported ones.

• Imports: India imported minerals worth Rs 10,12,529 crore in 2025-26, and steelmakers turn to imports when domestic minerals cost more.
• Strategic minerals: Levies reach critical minerals such as graphite and atomic minerals such as uranium, which can make their extraction uneconomical.
• One national market: Widely differing State levies fragment the market and raise transport and logistics costs; a levy at the mine passes on through steel, cement and electricity to households.
• Jobs and investment: Coal employs over 5 lakh people and the non-coal sector more than 1 crore, and investors commit capital only under a stable tax regime.

Industry agrees. The FICCI Mining Committee's chair, also NMDC's chief, said the Act would bring uniformity and predictability to the levy regime.

The States' Case: Odisha, Jharkhand and Kerala

• Odisha: A former Union Minister puts the State’s claim at over Rs 1 lakh crore in dues since 2005, collectable from 1 April 2026, plus Rs 50,000 crore a year in cess; the State has not made an official estimate. Of a Rs 22,000 crore penalty imposed on miners in 2021-22 for excess mining, Rs 16,000 crore had been collected; the rest is now beyond reach.
• Jharkhand: Chief Minister Hemant Soren called it a “black Bill” passed without consulting the States; the State puts its revenue loss at around Rs 14,000 crore and will move the Supreme Court.
• Kerala: The Chief Minister, V.D. Satheesan, objected that the Act brings land, Entry 18 of the State List, within the Centre’s sphere, and pointed to the mineral sands of the Chavara belt in Kollam, with ilmenite, rutile, garnet and monazite.

Odisha's dispute is two decades old. In 2004 it enacted the Odisha Rural Infrastructure and Socio Economic Development Act to tax miners; the Orissa High Court struck it down and the State appealed. Critics also ask who answers for mining's damage, from chromite pollution in the Sukinda valley to displacement, once the State loses its taxing power.

Fiscal Federalism and the Coming Supreme Court Challenge

Fiscal federalism is the division of taxing and spending powers between the Union and the States. For the first time, the MMDR Act now carries a limitation under Entry 50 on State taxes on mineral rights, the route MADA said was open.

The dispute fits a long pattern. The Constitution centralises economic and financial powers in the hands of the central government, while the States have immense responsibilities but very meagre revenue sources; demands for State autonomy have long included independent sources of revenue and greater control over resources, known as financial autonomy. For the mineral States, a tax on minerals was one such source.

The harder question is land. MADA held that limitations under Entry 50 do not reach the States' power to tax land under Entry 49, while the 2026 Act covers mineral-bearing land as well as mineral rights. A court will also be asked whether a law can make unpaid tax demands invalid when the Supreme Court had allowed them.

MMDR Act 1957 Explained: Auctions, DMF and Critical Minerals

The MMDR Act 1957 and Its 2015 and 2023 Amendments

The MMDR Act, 1957 is the central law on prospecting and mining: it lays down who may hold a mineral concession, for how long and on what payments. The States grant most concessions and collect the revenue under it.

• 2015 amendment: Mining concessions were to be allocated by auction, ending discretionary allocation; District Mineral Foundations and a National Mineral Exploration Trust were created; leases ran for 50 years instead of 30.
• Auctions since: 723 major mineral blocks have been auctioned across 17 States, and 2025-26 was the best year, with a record 212 blocks auctioned.
• 2023 amendment: The Central Government auctions the mining lease or composite licence for critical minerals listed in Part D of the First Schedule (Section 11D), but the royalty and auction amount still accrue to the State, and exploration licences were introduced.
• National Critical Mineral Mission: Approved on 29 January 2025 with an outlay of Rs 16,300 crore up to 2030-31.

MMDR Act for UPSC: GS Paper II and III Links

Where the Mineral Tax Dispute Sits in the Syllabus

The MMDR Act belongs to General Studies Paper II, under the federal structure, the distribution of powers between the Union and the States and issues of fiscal federalism, and to Paper III, under mineral resources and infrastructure. State PCS papers test the same ground.

1. Prelims facts: Entry 54 of List I; Entries 23, 49 and 50 of List II; MADA, 25 July 2024, royalty not a tax; arrears from 1 April 2005 in twelve-year instalments from 1 April 2026; Section 9D; minor minerals under Section 15; District Mineral Foundations under Section 9B.
2. Mains analysis: Federal supremacy and harmonious construction; uniform taxation against State fiscal autonomy; revenue of mineral-rich States; the rights of mining-affected people.