INDIA’S MINERAL WEALTH: WHO WILL CONTROL THE RULES?

 

BIZ MASALA  |  BUSINESS • POLICY • PEOPLE • IMPACT

The Centre plans a new mining law after tightening the rules governing state levies. The contest is about investment, taxation, federal powers—and who benefits from India’s natural resources.

By Murthy ASR  |  Biz Masala  |  19 October 2026

The proposed overhaul could reshape the rules governing mineral extraction, public revenue and investment.

A major change on the horizon

The Union Government is preparing to replace the Mines and Minerals (Development and Regulation) Act, 1957, with a comprehensive new mining law, according to reports published on 18 October citing government sources. An inter-ministerial committee is expected to review the existing framework, consider international practices and consult states and other stakeholders before a draft bill is prepared. The government’s stated objective is to modernise the regime and make doing business easier.

The proposal is at an early stage. A publicly available final draft has not yet been identified. The shape of the law—and its consequences for state finances, companies and mining-affected communities—will depend on the provisions eventually proposed and enacted.

A reform following the 2026 amendment

The policy debate follows the 2026 amendment to the MMDR framework.

The proposed overhaul follows Parliament’s passage of the Mines and Minerals (Development and Regulation) Amendment Act, 2026. The amendment introduced Section 9D, restricting state governments from imposing specified taxes, cesses and other levies on mineral rights and mineral-bearing land, subject to conditions and restrictions prescribed by the Centre. The provision also addresses certain past unpaid or unrecovered levies; amounts already paid or recovered are not refundable under the provision.

The exact reach of the new provision, its commencement and its application to particular state measures require close reading of the enacted text and relevant notifications. It would be premature to treat it as a blanket transfer of every state power or every mining-related revenue stream to the Union.

The legal question: who can tax mineral rights?

In July 2024, a nine-judge Constitution Bench of the Supreme Court in Mineral Area Development Authority v. SAIL held that royalty under the MMDR Act is not itself a tax and that states have constitutional authority to tax mineral rights, subject to the constitutional framework. The 2026 amendment therefore raises important questions about how Parliament’s new restrictions interact with that judgment and with the division of powers between the Union and states.

The legal position should not be reduced to a simple Centre-versus-states slogan. The answer will depend on the precise statutory language, the type of levy involved, applicable constitutional provisions and any subsequent judicial interpretation.

The Centre’s case: predictability and production

Mining operations depend on a predictable framework for approvals, costs and long-term investment.

The investment case for a clearer mining regime is straightforward. Mining projects require substantial upfront capital, long development timelines and supporting infrastructure. Uncertainty over the applicable tax and levy framework can affect project economics and investor decisions. A more coherent law could help align auctions, approvals, exploration, production and downstream mineral-based manufacturing.

But legal certainty alone does not guarantee new output. A block being auctioned is not the same as a mine becoming operational. Production depends on clearances, land access, infrastructure, financing, technology and local conditions. The performance test for a new law should therefore be the conversion of awarded blocks into responsible, producing mines—not auction totals alone.

The state question: what happens to public revenue?

Mineral-producing states—including Odisha, Jharkhand, Chhattisgarh and Telangana—have a direct stake in the outcome. Mining-related receipts can support state budgets and local development, while the distribution of costs and benefits varies across minerals, projects and districts. The proposed framework raises questions about how much fiscal discretion states will retain and how any changes will affect predictable funding for public services and affected regions.

The Ministry of Mines has reported that around 90% of mining-sector revenue accrues to states. It has also reported total mineral revenue of approximately ₹1,14,549 crore in FY2025–26, including coal. These are government-reported figures; the precise composition and treatment of individual revenue streams should be checked against the underlying official tables before drawing conclusions about the effect on any one state.

The accompanying infographic summarises government-reported mineral revenue and selected indicators. Figures and categories should be read with the source notes and reporting period.

Industry’s expectations—and the test of delivery

Industry will look for clarity on levies, approvals, timelines and the reliability of mineral supply.

Mining companies and downstream users need rules that are stable, transparent and consistently applied. Steel, cement, power and manufacturing depend on reliable mineral supplies, but a lower or more predictable cost structure is only one part of competitiveness. Infrastructure, environmental compliance, worker safety, community relations and timely approvals all influence whether projects proceed.

The government has reported that 723 major mineral blocks have been auctioned across 17 states, with 36 operationalised in FY2025–26. The two figures measure different stages of the process: an auction awards a block, while operationalisation indicates progress toward production. They should not be presented as equivalent measures of output or investment realised.

The communities on the ground

Mining can create jobs and infrastructure, but local outcomes depend on safeguards and delivery of promised benefits.

For communities near mines, the debate is not only about the division of tax powers. It is also about environmental protection, land and livelihood impacts, rehabilitation, health, water and whether development benefits reach the people who bear the immediate costs of extraction.

District Mineral Foundation (DMF) funds are intended to benefit people and areas affected by mining. The relevant accountability questions are practical: how much has been collected in each district, how much has been spent, which projects were completed, who benefited and whether outcomes can be independently verified. Aggregate collections alone cannot establish that communities have received effective compensation or development.

What the new law should make clear

·       Federal balance: spell out the respective roles of the Union and states and how the new restrictions apply to different categories of levy.

·       Fiscal transparency: publish comparable state-wise data on royalties, auction premiums, other receipts and any changes attributable to the new framework.

·       From auction to production: disclose block-wise progress, key bottlenecks, timelines and reasons for delays.

·       Community outcomes: publish district-level DMF collections, commitments, spending and independently measurable results.

·       Environmental and worker safeguards: retain enforceable protections and make compliance and remediation transparent.

What remains to be verified

This is a news-based first-cut account of a reported policy proposal and the 2026 amendment. Before a deeper follow-up investigation, Biz Masala will need to examine the committee’s official terms of reference, the relevant commencement notification, the exact statutory text, state-wise revenue exposure, company-level implications and any draft bill when it becomes available. At present, the full state-by-state fiscal effect and the final design of the proposed law remain unverified.

The bottom line

India needs a mining framework that encourages investment and production while protecting legitimate public revenue and ensuring that mining-affected communities receive a fair share of the benefits. The proposed new law could reshape that balance. Its success should be judged not by the announcement alone, but by the provisions enacted, the mines brought into responsible production, the transparency of public finances and the evidence of outcomes on the ground.

Sources and reporting notes

·       Business Standard, 18 October 2026 — report on proposed MMDR overhaul — https://www.business-standard.com/industry/auto/centre-plans-mmdr-act-overhaul-to-draft-comprehensive-new-mining-law-126101800210_1.html

·       Moneycontrol / PTI — report on proposed new mining law — https://www.moneycontrol.com/news/business/economy/centre-plans-overhaul-of-mmdr-act-to-create-new-mining-law-14054754.html

·       PRS Legislative Research — MMDR Amendment Bill, 2026 analysis — https://prsindia.org/billtrack/the-mines-and-minerals-development-and-regulation-amendment-bill-2026

·       Ministry of Mines / PIB — government backgrounder — https://www.pib.gov.in/PressReleasePage.aspx?PRID=2301002&lang=2&reg=48

·       Ministry of Mines / PIB — FAQ — https://www.pib.gov.in/FaqDetails.aspx?ModuleId=4&NoteId=159647&id=159647&lang=1&reg=48

·       Gazette Tracker — reproduction of 2026 Act — https://www.gazettetracker.com/g/CG-DL-E-17082026-275519

Editorial note: This first-cut news story distinguishes reported plans from enacted provisions and government-reported figures from independently verified outcomes. The proposal’s final provisions and state-level effects remain subject to verification.

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