MMDR Amendment Bill: Parliament’s passage of the Mines and Minerals (Development and Regulation) Amendment Bill, 2026 has reopened an old federal question: how far can Parliament limit a state’s power to tax mineral resources? The government says uneven state levies raise mining costs and create large differences in mineral prices. Mineral-rich states see the Bill as an intrusion into a taxing power assigned to them by the Constitution. The Lok Sabha passed the Bill on August 12 and the Rajya Sabha a day later. It now awaits presidential assent.
The Centre has an economic case. Royalties, auction premiums, taxes and cesses add to the cost of extracting and selling minerals. Large differences across states can affect the economics of mines and downstream industries. The constitutional question is harder because the Supreme Court examined this division of powers only two years ago.
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MMDR Amendment Bill changes mineral tax rules
The Bill amends the Mines and Minerals (Development and Regulation) Act, 1957. It brings the regulation of “mineral bearing lands” under Union control and proposes a new Section 9D. A state government will not be able to impose a tax, cess or similar levy on mineral rights or mineral-bearing land except within conditions or restrictions prescribed by the Centre. The Bill also invalidates earlier dues that had neither been recovered nor deposited before the amendment takes effect, while amounts already collected will not be refunded.
The government’s stated reason is the variation in state levies. Its Statement of Objects and Reasons refers to high tax burdens, new levies introduced after mining has begun, multiple imposts, differences in rates across states and retrospective taxation. It argues that these costs can make domestic minerals expensive and, in some cases, encourage imports.
Union Mines Minister G Kishan Reddy has said the amendment concerns major minerals and leaves the states’ powers over 49 minor minerals intact. Major minerals include coal, iron ore, limestone, copper and manganese.
Cost differences matter particularly in commodities such as coal and iron ore. Coal prices feed into electricity and industrial costs. Mining projects also require large investments that are made over long periods. Investors therefore have a legitimate interest in knowing the tax regime before committing capital. The 2026 amendment, however, goes beyond fixing rates. It changes who can decide them.
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Supreme Court ruling hangs over mineral taxation
That takes the issue back to Mineral Area Development Authority v Steel Authority of India. On July 25, 2024, a nine-judge Constitution Bench ruled by 8:1 that royalty under the MMDR Act is not a tax and that state legislatures have the power to tax mineral rights. The Court found that the existing MMDR Act did not expressly restrict that power.
The judgment did not give states an unrestricted field. Entry 50 of the State List gives them power to tax mineral rights subject to limitations imposed by Parliament through a law relating to mineral development. The Supreme Court held that Parliament can prescribe such limitations and that they may extend to prohibition. The authority to levy the tax remains with the states, subject to those parliamentary limits.
That finding gives the Centre considerable room on taxes imposed under Entry 50. Mineral-bearing land presents a different problem. The Supreme Court also held that mines and quarries fall within “lands” under Entry 49 of the State List and that states can tax such land using mineral value or production as a measure. PRS Legislative Research has consequently flagged a question over Parliament’s competence to regulate mineral-bearing land and restrict taxes imposed on it.
The distinction matters because the 2026 Bill covers both mineral rights and mineral-bearing land. A challenge to the law will therefore involve more than the proposition that Parliament may limit mineral taxes under Entry 50.
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Mineral taxation becomes a fiscal federalism dispute
Kerala has said it will oppose the amendment politically and legally, arguing that it cuts into the states’ constitutional and fiscal powers. Jharkhand Chief Minister Hemant Soren has asked the President and the Prime Minister to reconsider the legislation and has warned about its effect on the finances of mineral-rich states.
The Centre’s answer has focused heavily on revenue. According to Mines Ministry figures cited by Reddy, states’ mineral revenues rose from ₹13,258 crore in 2014-15 to ₹71,035 crore in 2024-25. Their share of total mineral revenues rose from 65% to 88%. In coal, state revenues increased from ₹11,948 crore to ₹58,592 crore, while their share rose from 55% to 96%. Auction premiums and royalties accrue to states, while District Mineral Foundation collections are spent in mining-affected areas.
Those numbers establish that states receive most mining revenue. They do not determine the constitutional scope of a state legislature’s taxing power. Nor do aggregate receipts show how individual mineral-producing states will be affected by Section 9D.
The Bill’s Financial Memorandum says the amendment will impose no recurring or non-recurring expenditure on the Consolidated Fund of India. It contains no corresponding state-wise assessment of the revenue affected by the proposed restrictions.
Parliament is on firmer constitutional ground when limiting taxes on mineral rights under Entry 50. The position on mineral-bearing land under Entry 49 is less settled in the Centre’s favour. The 2024 judgment drew that distinction. The 2026 Bill now puts it directly at issue. If Kerala proceeds with its legal challenge, the dispute will turn on the reach of Section 9D and Parliament’s new claim of control over mineral-bearing land.