Mining, Money and the States
All Things Policy
The episode explores the implications of the Mines and Minerals Development and Regulation (MMDR) Amendment Act 2026 in India. The discussio
Key takeaways
- The 2026 amendment seeks to reverse the 2024 Supreme Court ruling that had categorized royalty as something other than a tax.
- Moving from a first-come, first-served model to auctions has increased upfront capital risk for mining companies in India.
Main topics
- MMDR Amendment Act 2026
- Mining taxation and royalties
Notable quotes
The effective tax rate in many of these major minerals for a mining company could be 60 to 65%.
Conclusion
The episode concludes that while the amendment aims to simplify taxati
Transcript preview
Speaker 2 (0:03) Welcome to All Things Policy, a daily podcast by the Takshashila Institution. We are a bunch of policy nerds based in Bengaluru, and we like bringing fresh perspectives to Indian affairs and Indian perspectives to global affairs. So grab a cup of coffee, sit back and join us for today's chat. Speaker 3 (0:29) Hello everyone, welcome to a new episode of All Things Policy. I'm Subban, your host for today. This is a podcast where we discuss policy, laws and everything in between. Today we are discussing a new law, actually an amendment to a law, Mines and Minerals Development and Regulation Amendment Act 2026, which was passed by both houses recently. What does this mean for us? What does it mean for state finances? What does it mean for federalism? A lot of other questions are there waiting to be answered. To answer this and a whole lot of other questions in between, I have with me my colleagues Shobhankita and Sarthak. Hello, Shobhankita. Hello, Sarthak. Speaker 1 (1:06) Hi, Subhan. Hi, Speaker 4 (1:07) Subhan. Thanks for having us. Yeah. Speaker 3 (1:10) Both of them are experts in respective fields of probably mines, minerals, and things like that, as well as public finance. Both of them have an op-ed recently in The Print, which talks about this law and what should be done. We will link the op-ed itself in the show notes. Please make sure you read it. But before that, to get a brief or to give you an overview of the entire thing, let's begin the show. Shravankita, first, what is this? What did it change? And, you know, what are the final details that you'd like to tell us about? Speaker 4 (1:45) First, I'd like to say that the MMDR Act is the most consequential act for the mining industry in India. apart from maybe the National Critical Mineral Mission, which is focused on critical minerals and red earths. But otherwise, the MMDR is really the most important regulation that the Ministry of Mines has. And amendments to this over the years has been... the most consequential for the industry as well. For example, a very definitive change that happened through the 2015 amendment to the Act in 2015, like I was saying, was following the Colgate scandal. And that changed the method of allocation of mineral reserves and blocks from a first-come, first-served to that of auctions. And that really changed what it meant for private investments, business certainty in the sector, so on and so forth. Recently, in 2023, we had another amendment, which opened up mineral reserves for exploration. And the exploration-licensed regime that currently operates in India came through that amendment. And of course, the recent one, which is the 2026 amendment, is also very, very interesting. But the history to the 2026 amendment actually goes back to 1989. So let me explain what that was. So in 1989, the Supreme Court ruled that royalty paid by mining companies is... tax. And so further taxation or further levies could not be collected by the state. In 2024, that was reversed. And so many years after this 1989 judgment, in a nine-bench court ruling of the Supreme Court, specifically the Mineral Area Development Authority versus Steel Authority of India ruling in 2024, this judgment was reversed. And so they decided that royalty paid by mining companies is not a tax. Speaker 3 (3:36) Okay, so that means they can tax further. Speaker 4 (3:38) Yes, and so they could tax further. And that just changes, for example, how much burden there may be on mining companies, right? Especially because since 1992, in light of the previous judgment, royalty rates had just been increased as a way to compensate states by the union. And so we see how this change suddenly in 2024 could change the effective tax rate on mining companies. And so this 2026 amendment seeks to reverse this again and go back to what it used to be prior. And so that's one, right? So firstly, this is an act of the parliament trying to reverse the Supreme Court judgment in 2024. So that's firstly what happened. And secondly, the 2024 judgment also held that state legislatures have absolute and exclusive authority to levite acts on mineral rights, subject only to a law enacted by the parliament, which is exactly the law of the parliament, which came about in 2026. And further, there is this distinction between mineral-bearing lands and mines. So lands that have mineral reserves. could fall into the category of land, and hence their exclusive domain is within that of state legislatures. And this 2026 amendment seeks to change much of this. So firstly, what they've done is that because of this change in 2024, we were expecting states to retrospectively collect taxes from mining companies for... a period of about 12-15 years, and that was expected to start April 2026. And so different states have collected this in different measures. Obviously, the more aggressive states have managed to collect a little more, some not so much. So what this happened in August 2026 was that, firstly, the MMDR 2026 says that any collection retrospectively stays valid. But any future collection, retrospectively, is invalid. And so what's collected remains, what's not collected is now foregone. So that's one, right? And it further requires that any further collection that state legislatures would want to do would now need approval by the union. And so any future collection that state legislatures might have now comes under a statutory framework or rules and regulations that the union stipulates. So that's one. So there's a little bit of control. by the states losing control. Exactly. So that's one. And the second thing is, it also states that this Supreme Court judgment now stands reversed. And the idea is, let's simplify this mining taxation regulation on India. overall and so let's have this stipulated by the union, right? So there is a change in what this means between mineral-bearing lands versus mines as well as what the union can collect or what the states can collect as dictated by that of the union. So it's quite a complex state of affairs and we expect that at least some of these provisions may get further challenged in court because firstly, there are some provisions like If retrospectively it has been collected, now it's