By Sidhartha Jain
Last week, Parliament passed the Mines and Minerals (Development and Regulation) Amendment Bill. By restricting additional levies by state governments & addressing certain legacy exposures, the Bill ensures greater certainty over future costs & past liabilities for mining companies, writes Sidhartha Jain
How will the new Bill improve tax certainty for mining companies?
The issue after the Supreme Court’s 2024 ruling in the Mineral Area Development Authority (MADA) vs Steel Authority of India case was concrete. Jharkhand and Tamil Nadu enacted fresh levies on mineral-bearing land, while Karnataka’s legislation covering mineral rights as well awaits Presidential assent. The Supreme Court permitted demands on transactions from April 2005, with exposure across public and private miners estimated in lakhs of crores of rupees.
The Mines and Minerals (Development and Regulation) Amendment Bill, 2026 (MMDR Bill) now addresses both dimensions: future levies by state governments would operate within conditions and restrictions prescribed by the Centre; past levies not deposited or recovered would become invalid, with amounts already paid not refundable. The outcome is not necessarily lower taxation but a coherent framework and greater certainty over future costs and past liabilities.
How does India’s overall tax and levy burden compare with others?
India differs from mining jurisdictions in both the incidence and design of its fiscal burden. The mines ministry-supported FIMI-EY study of 2025 places India’s effective burden upwards of 50% of revenues even before auction commitments, compared with about 40% in Australia and South Africa and 34-40% in the Canadian jurisdictions studied.
India’s framework includes royalty, statutory contributions and, for auctioned mines, a continuing premium linked to mineral value. In comparison, Canadian mining taxes are largely profit-based, while South Africa follows a profitability-linked royalty structure. Post-MADA, the possibility of new State levies added further complexity, which the MMDR Amendment Bill now seeks to resolve.
Will it help boost investment in critical minerals?
THE AMENDMENT COMES as India steps up its critical-minerals programme. The National Critical Mineral Mission envisages `16,300 crore of government expenditure and 1,200 exploration projects through 2030-31, alongside greater private participation in critical and deep-seated minerals. Fifty-six critical and strategic mineral blocks stand auctioned so far across successive tranches. Exploration capital is committed years before revenue arises and is therefore most sensitive to fiscal unpredictability. A stable levy regime, alongside other project fundamentals, strengthens the case for committing it to India’s critical minerals.
What about states’ fiscal autonomy?
The amendment does not extinguish the taxing powers recognised in MADA, but places their exercise within conditions and restrictions to be prescribed by the Centre. For mineral rights, Entry 50 of the State List contemplates Parliamentary limitation through a law on mineral development.
The amendment also brings mineral-bearing lands within the MMDR framework, an area where MADA located the power of the states in Entry 49. This could raise questions on their fiscal autonomy; equally, mineral-rich states have legitimate revenue and local development interests. How the Centre frames these conditions, and how courts read the amendment, will shape the eventual balance.
Likely impact on private investment & FDI in mining
India permits 100% FDI in mining via the automatic route, so the constraint is less access than project economics. The immediate effect is on balance sheets: invalidated legacy levies allow firms to reassess provisions, contingent liability disclosures and cash-flow planning, with staggered payments otherwise due from April 2026.
For existing mines, the amendment provides visibility over future state-level fiscal costs; for new auctions, a clearer framework should aid project valuation and bidding decisions. Investors will also watch the conditions the Centre notifies under the amended law. Whether this translates into fresh investment will depend on the competitiveness of India’s mining ecosystem.
Is uniformity in mining tax likely?
Complete fiscal uniformity is unlikely. Royalty rates are already prescribed centrally, although revenues accrue to state governments, while auction premiums and mine economics vary across projects. The Bill brings greater consistency to the treatment of further state levies.
It could also shift competitive federalism towards factors states can influence directly: geological information, infrastructure, faster approvals and post-auction facilitation. States can continue to differentiate themselves through the quality of their mining ecosystem, within a more consistent overall fiscal structure.
The writer is tax partner, EY India
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.