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A PIB Backgrounder issued on 19 August 2026 explains the Mines and Minerals (Development and Regulation) Amendment Act, 2026, which restricts state levies on mineral rights and mineral-bearing lands in order to create a uniform and predictable fiscal regime for major minerals.
The government's position is that states currently impose about 14 kinds of taxes, charges, fees and levies on mining — some taxes on mineral-bearing lands running as high as 20 per cent — and that this cascades into the cost of steel, cement, power and infrastructure.
The Act is stated not to reduce state revenue: states continue to receive royalty, auction premium, District Mineral Foundation payments and their share of GST, and roughly 90 per cent of mining revenue keeps accruing to them.
Minor minerals — nearly 50 of them, including sand, gravel, clay, silica, granite, marble, gypsum and laterite — remain entirely with the states, whose regulatory and taxing powers over them are untouched.
The backgrounder also compiles a decade of mineral-sector data: 723 major mineral blocks auctioned across 17 states since 2015, a record 212 in FY 2025-26, and India ranking second globally in limestone, third in zinc, fourth in iron ore and fifth in bauxite.
Empowers Parliament to regulate mines and mineral development to the extent that such Union control is declared by Parliament by law to be expedient in the public interest. The MMDR Act, 1957 is the exercise of this power
Gives states the power to regulate mines and mineral development, but expressly 'subject to the provisions of List I' — so once Parliament makes the Entry 54 declaration, the state field shrinks to what the Union law leaves untouched
'Taxes on mineral rights, subject to any limitations imposed by Parliament by law relating to mineral development.' This is the pivotal entry: the state taxing power exists, but the Constitution itself contemplates Parliament limiting it — which is precisely what the 2026 amendment does
Taxes on lands and buildings — the entry states relied on to tax mineral-bearing land, and the second leg the amendment addresses
The governing statute for major minerals. Section 9B provides for District Mineral Foundations and Section 9C for the exploration trust; the 2026 Act adds the restriction on state levies
A nine-judge Constitution Bench held by 8:1 on 25 July 2024 that royalty is NOT a tax, overruling India Cement Ltd. v. State of Tamil Nadu (1989) on that point, and upheld the states' legislative competence to tax mineral rights and mineral-bearing lands. Justice B.V. Nagarathna dissented. The 2026 amendment is Parliament exercising the very limitation that Entry 50 preserves for it
Work for the interest and benefit of persons and areas affected by mining operations
Key: Introduced by the 2015 MMDR amendment under Section 9B and constituted as a trust in every mining-affected district. Lease holders contribute 30 per cent of royalty for leases granted before 2015 and 10 per cent for post-2015 auctioned leases. The entire collection is spent on local development, with the district administration choosing the projects. 656 DMFs exist, 106 of them in aspirational districts
Channel DMF funds into welfare and development in mining-affected areas
Key: Launched on 17 September 2015 by the Ministry of Mines. At least 60 per cent of DMF funds must go to high-priority areas — drinking water, environment and pollution control, health, education, welfare of women, children, the aged and the disabled, skill development and sanitation
Fund and expedite mineral exploration, and now also support development and infrastructure in the sector
Key: Set up as the National Mineral Exploration Trust by gazette notification of 14 August 2015 under Section 9C of the MMDR Act, funded by lease holders' contributions (originally 2 per cent of royalty, raised to 3 per cent). Renamed and given a wider mandate by the 2025 amendment, which also allowed it to support exploration abroad
Secure India's supply of critical and strategic minerals across exploration, mining, processing and recycling
Key: Approved on 29 January 2025 with an outlay of Rs 16,300 crore, including Rs 2,600 crore of budgetary support, running up to FY 2030-31; underpins the 1,200-project exploration pipeline being pursued by GSI and NMEDT
Acquire and develop mineral assets overseas for India's strategic and critical mineral needs
Key: Has secured exclusive lithium exploration rights in Argentina; complements the 2025 amendment's provision allowing NMEDT to fund exploration outside India
Digitally track a mineral block through its entire lifecycle from auction to operationalisation
Key: Built jointly with the states; supported by Coal and Mineral Exchanges intended to aid transparent price discovery
The national agency for geoscientific surveys and mineral exploration; completed 457 projects in Field Season 2025-26, including 230 on critical and strategic minerals
Funds exploration projects, including 777 projects sanctioned at Rs 3,828.52 crore of which 255 relate to critical minerals; can now also fund exploration abroad
Joint-venture public sector company for acquiring overseas mineral assets, holding exclusive lithium exploration rights in Argentina
District-level trust that receives a share of royalty and spends it on the welfare of mining-affected people and areas, with project selection by the district administration
Royalty is the payment made to the state for the mineral actually extracted, fixed by the Centre in the MMDR Act's schedules; the Supreme Court held in 2024 that it is a contractual consideration flowing from the lease, not a tax. Dead rent is the minimum payment due on the leased area whether or not any mineral is raised, so that idle leases are not free. Auction premium is the percentage of the value of mineral despatched that the winning bidder offered at the e-auction — it is the competitive element introduced in 2015 and is paid on top of royalty. District Mineral Foundation contribution is a proportion of royalty — 30 per cent for pre-2015 leases and 10 per cent for auctioned leases — ring-fenced for the welfare of people affected by the mining. The 2026 amendment leaves all four intact and targets only the additional taxes and cesses some states levy on mineral rights and mineral-bearing land.
Simple Analogy: Think of a shop tenancy: royalty is rent per unit sold, dead rent is the minimum monthly rent even in a dry month, auction premium is the extra the tenant bid to win the shop, and the DMF share is a fixed slice of the rent the landlord must spend on the neighbourhood. The dispute was never about these four — it was about a further levy the local authority wanted to add on top.
| Aspect | Major minerals | Minor minerals |
|---|---|---|
| Examples | Coal, iron ore, limestone, bauxite, zinc, critical minerals | Sand, gravel, clay, silica, granite, marble, gypsum, laterite — nearly 50 in all |
| Who regulates | Central Government under the MMDR Act, 1957 | State Governments, exclusively |
| Effect of the MMDR Amendment Act, 2026 | State taxes on mineral rights and mineral-bearing lands are restricted | No effect — states retain full power to regulate, administer and tax |
| Revenue flow | States continue to receive royalty, auction premium, DMF share and their GST share, about 90 per cent of the sector's revenue | Entirely with the states |
Mines and Minerals (Development and Regulation) Act enacted, using Parliament's power under Entry 54 of the Union List
India Cement Ltd. v. State of Tamil Nadu — the Supreme Court treats royalty as a tax, limiting state levies
State of West Bengal v. Kesoram Industries — a Constitution Bench takes the contrary view, creating the conflict that a larger bench would later resolve
MMDR amendment ends discretionary allocation and introduces competitive e-auction; District Mineral Foundation created under Section 9B and the National Mineral Exploration Trust under Section 9C
Pradhan Mantri Khanij Kshetra Kalyan Yojana launched for mining-affected areas
Mineral Area Development Authority v. Steel Authority of India — a nine-judge Bench holds 8:1 that royalty is not a tax and upholds states' competence to tax mineral rights; Justice B.V. Nagarathna dissents
National Critical Mineral Mission approved with an outlay of Rs 16,300 crore up to FY 2030-31
Rs 1,500 crore incentive scheme for critical mineral recycling launched
The Mines and Minerals (Development and Regulation) Amendment Bill, 2026 passed by both Houses of Parliament
PIB Backgrounder issued explaining the Act's revenue, federal and minor-mineral implications
A rare instance of Parliament using a limitation the Constitution itself reserves to it (Entry 50) to narrow a state taxing power the Supreme Court had just affirmed — pair it with GST and the Finance Commission for centre-state revenue questions
The NCMM, KABIL's Argentine lithium rights, the recycling incentive and the customs duty removals all serve battery and clean-energy supply chains, linking mining policy to climate and strategic-autonomy questions
106 of the 656 District Mineral Foundations are in aspirational districts, tying mining revenue directly to the government's backward-district strategy
The interplay of Entry 54 (Union) and Entry 23 (State) is the textbook illustration of Parliament occupying a field by declaration — useful for GS2 questions on the distribution of legislative powers
The provision invalidating unpaid pre-commencement levies revisits a theme familiar from the Vodafone and Cairn disputes — investment certainty versus revenue recovery
GS Paper 2 > Polity > Federal Structure and Distribution of Powers; GS Paper 3 > Indian Economy > Mineral Resources and Government Policies
General Awareness > Indian Polity and Economy
General Awareness > Economy and Government Policy
General Awareness > Indian Economy and Mineral Resources
Mineral policy has recurred every year since the 2015 auction reform, with the 2024 nine-judge ruling and the critical-minerals push making it a standing high-yield area
The payment due to a state for the mineral actually extracted under a lease; held in 2024 by a nine-judge Bench of the Supreme Court not to be a tax
The minimum payment on a leased mining area whether or not any mineral is raised
The share of the value of mineral despatched that the winning bidder offers at e-auction, introduced by the 2015 reform to replace discretionary allocation
Nearly 50 minerals including sand, gravel, clay, silica, granite, marble, gypsum and laterite, regulated and taxed exclusively by state governments and untouched by the 2026 amendment
Concessions for exploration-stage work; reimbursement of half of direct exploration cost is capped at Rs 20 crore for exploration licence holders and Rs 8 crore for composite licence holders
A district identified by NITI Aayog for focused development; 106 of the 656 District Mineral Foundations lie in such districts