A 40-year old battle over India’s minerals hits a climax

**Akshara** (0:04)
In today's episode, we'll break down an interesting story. A 40-year-old battle over India's minerals hitting a climax. Welcome back to The Daily Brief by Zerodha where we cut through the noise to help you understand what's actually happening in the most important stories from business and markets. I am your host Akshara and today is Wednesday 19th August. Coming to the first story.
Last week, the Lok Sabha passed the Mines and Minerals Development and Regulation on MMDR Amendment Bill 2026

**SPEAKER_2** (0:33)
Mines and Minerals Development and Regulation Amendment Bill 2026 to further amend the Mines and Minerals Development and Regulation Act 1957 be taken into consideration.

**Akshara** (1:05)
This may have been business as usual, but it was passed in just about 10 minutes. There was essentially no debate. It was introduced through voice vote, while opposition members were protesting other political issues. And the Rajya Sabha cleared it a day later.
The passing of the bill has left many people, particularly the leaders of state governments, unhappy. They have accused the bill of being in opposition to federalism, one of the key tenets of India's constitution, by taking away the independence of India's individual states. And they plan to challenge it in court.
So what did the bill do that created so much uproar? At its core, it took away states' ability to tax their own mineral resources, and states no longer have any power to levy taxes, cesses or any other charges on minerals, except only under conditions this center prescribes. Moreover, any unpaid use from past state-level mineral taxes have been forgiven. Only amounts already collected are safe from reversal. Now this swing of financial power of center and states is not new to India.
This particular case is the climax of a nearly 40-year-long legal and political battle. And it has ping-ponged between the Supreme Court and Parliament, put thousands of crores of rupees worth at risk, and now sits at the heart of a clash between India's mineral sovereignty and federalism. So without further ado, let's roll the clock back all the way to 1989
Back then, India Cements held a mining lease in Tamil Nadu. Under the Central MMDR Act of 1957, it paid a royalty to the state government for every tonne of mineral it extracted. And the royalty rates are fixed by the center. This is the standard practice where you pay the landowner, in this case the government, for the right to dig. But the Tamil Nadu government had gone a step further. It levied a cess on top of that royalty. And there was a state law that allowed them to charge 45 paise per rupee of land revenue. And this land revenue was calculated based on the royalty rates. So India Cement challenged this. Arguing that they were effectively being double-taxed for the minerals they dug up. After all, the royalty itself was based on the quantity of minerals extracted. So any cess calculated on that royalty was ultimately a tax on minerals. And under the Constitution, the Centre and not the states controlled mineral taxation through the MMDR Act. So a seven-judge bench of the Supreme Court agreed with India Cement. It ruled that the cess be removed. But in doing so, the judges wrote something fateful in their order.
Royalty is a tax.
Now remember, this is not the same as treating royalty as a contractual fee for using land. You pay royalties or rent because you've agreed to a lease. But by declaring royalty itself to be a tax, the court had effectively killed states' power to charge anything at all on top of century fixed royalties. Even private landowners can charge royalty, but only a government can charge a tax. The two are fundamentally different things. So, that is the debate at the heart of this saga. How is a royalty different from a tax?
So state governments felt slighted by the fact that they couldn't benefit from the minerals within their own borders. But they didn't sit still either. They were determined to find a new way to extract those benefits, so several mineral-rich states passed new local laws that targeted the land that bore minerals, rather than the minerals themselves. Why could they do this? So land is exclusively a state subject to the Indian Constitution. There's a rule under Entry 49 that gives states full power to put taxes on land and buildings, and that would of course also apply to land that contained lots of minerals, even if the monetary value of that land was based on the minerals themselves. And mining companies saw through this immediately. For instance, in 1999, SAIL filed a case against the state of Bihar, arguing that a tax on land that was calculated on the basis of the minerals underneath was yet again just a tax on minerals. So the Mineral Area Development Authority, or MADA, representing the state's position, argued back, royalty is not a tax, and if it's not a tax, then states can levy their own charges.