Centre’s Mineral Bill Reshapes Offshore Mineral Revenue Sharing Between Centre And States

The Lok Sabha on August 12 passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2026, seeking to alter the legal framework governing states' taxation of mineral rights and mineral-bearing land. The measure follows a landmark 2024 Supreme Court ruling that recognised the states' power to tax mineral rights and mineral-bearing land. The Bill has therefore raised questions over the balance of fiscal powers between the Centre and mineral-rich states.

The Supreme Court's nine-judge Bench, in Mineral Area Development Authority v. Steel Authority of India, ruled in July 2024 by an 8-1 majority that royalty is not a tax and that states retain the authority to impose taxes on mineral rights and mineral-bearing land. The ruling also permitted states to raise demands dating back to 2005, creating potentially substantial liabilities for mining companies and corresponding revenue claims for mineral-producing states. The new legislation seeks to address the financial and regulatory consequences of that judgment.

The Bill proposes restrictions on state levies relating to mineral rights and mineral-bearing land, while also dealing with outstanding demands from the period before its commencement. According to the draft described in the article, certain uncollected levies would be treated as invalid, while amounts already collected would not necessarily be refunded. The legislation also leaves the Central Government with the power to determine the limits of state levies through rules, raising concerns among critics over whether a power recognised constitutionally could become dependent on executive regulation.

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Several mineral-producing states could be affected by the changes, including Jharkhand, Odisha, Chhattisgarh, West Bengal, Bihar, Uttar Pradesh, Rajasthan, Andhra Pradesh, Telangana, Karnataka and Madhya Pradesh. The issue cuts across political lines, as some of these states are governed by the same party that leads the Union government. The debate therefore extends beyond the usual Centre-Opposition divide and concerns the distribution of fiscal authority between the Union and states.

The implications are particularly significant for coastal mineral-producing regions such as Kerala. The state has major deposits of heavy mineral sands, including ilmenite, particularly around Chavara in Kollam. The article also raises concerns over offshore mineral auctions and proposed rare-earth development, arguing that coastal communities and local governments could face environmental and economic consequences while having limited influence over decisions taken at the Union level.

The legislation is yet to take effect, with its commencement date and detailed rules still to be determined by the government. Critics have urged the Centre to limit restrictions to mineral rights, reconsider provisions affecting mineral-bearing land and place clearer limits directly in the statute rather than leaving them entirely to executive rules. They have also called for consultation with states and affected coastal communities before rules governing mineral development and taxation are finalised, keeping the broader debate centred on federalism, revenue-sharing and local participation in resource decisions.

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