India’s federal government plans to curb states’ powers to regulate or tax mineral rights and ore-bearing land, seeking to make rules uniform across the country.
Prime Minister Narendra Modi’s government has introduced a bill in Parliament that would amend laws to give it greater control over mining. This will allow New Delhi to set conditions and limits on taxes, as well as other levies imposed by regional authorities on minerals, according to the proposed legislation.
The cumulative impact of levies should not become disproportionate to the mine’s economic value and profitability, the government said in the amendment proposal. “There is also a risk of an increase in imports of minerals despite having sufficient local mineral resources as domestic mineral supply becomes expensive,” it added.
The move risks heightening tensions between New Delhi and regional governments by curbing a potentially important source of revenue for mineral-rich areas, just two years after the Supreme Court settled a long-running constitutional dispute over mineral taxation in states’ favor. Relations were already strained after the federal government unexpectedly cut consumption taxes last year, reducing states’ revenues.
“Overall, the proposal appears aimed at strengthening fiscal coordination between the center and states, creating a more consistent taxation framework across jurisdictions,” said Rajib Maitra, partner at Deloitte India. This will reduce fiscal uncertainty and also any retrospective liabilities for the mining sector, he added.
The central government controls mines and mineral development, but state administrations were allowed to collect additional levies from miners, based on the quantity of a mineral extracted. In August 2024, the Supreme Court had upheld the states’ right to impose levies on mining, in addition to royalties.
The amendment is aimed at providing stability and predictability in the fiscal regime for the mining sector, according to the bill. Uneven and high taxes are hindering investments in the sector by pushing up costs for miners and making operations unviable.
The amendment is seeking to change the fiscal balance, said Rohit Chandra, assistant professor at School of Public Policy, Indian Institute of Technology Delhi. “States from across the political spectrum will have a problem with this.”
(By Abhijit Roy Chowdhury and Preeti Soni)
