PolityGS2+ GS3

MMDR Amendment Bill restricts state mineral levies, reigniting federal tensions

PIB, Indian Express, The Hindu·2026-08-15

"MMDR Amendment Bill restricts state mineral levies, reigniting federal tensions"

Prelims Facts

  • •Sand is classified as a 'minor mineral' under Indian mining law; states have power to grant mining leases AND frame rules for minor minerals (both powers vest with states).
  • •District Mineral Foundation (DMF) was introduced by the MMDR Amendment Act, 2015; its sole purpose is protecting interests of persons affected by mining — NOT promoting exploration or authorising licences.
+4 more facts — sign up free to unlock

Key Terms

Entry 54 (Union List)

Parliament's power to legislate on mines and mineral development in the national interest.

Entry 50 (State List)

State power to levy taxes on mineral rights, subject to parliamentary limitations.

+4 more terms — sign up free to unlock

Study Note

BackgroundCore Concept

Background

Mineral regulation in India operates under a constitutionally divided framework embedded in the Seventh Schedule. Entry 54 of the Union List empowers Parliament to legislate on mines and mineral development to the extent declared expedient in the national interest, while Entry 23 of the State List grants states residual authority over mineral development, subject to that central override. Entry 50 of the State List separately preserves state power to levy taxes on mineral rights, subject to any limitations Parliament may impose. This layered architecture has historically generated friction: mineral-rich states argue that their constitutional entitlement to benefit from natural resources within their territory is progressively curtailed by central legislation invoking the national-interest override.

The primary statute is the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act), which has been amended several times — most significantly by the MMDR Amendment Act, 2015, which replaced discretionary first-come-first-served allocation with competitive auctioning of mineral blocks and created the District Mineral Foundation (DMF) under Section 9B. The DMF, operationalised through the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY), mandates that at least 60% of DMF funds be spent on high-priority welfare areas — drinking water, healthcare, education, environment, and livelihood — with the remaining 40% on secondary infrastructure. Subsequent amendments in 2021 and 2023 further streamlined block allocation and empowered the Centre to auction leases for critical minerals, reflecting India's strategic interest in securing supply chains for energy transition and advanced manufacturing.

A critical judicial turning point came with the 1989 ruling in India Cement Ltd v. State of Tamil Nadu, where the Supreme Court held that royalty on minerals was itself a tax and that states lacked legislative competence to levy additional charges, since the subject fell under the Union List. This constrained state revenue-raising for over three decades, until the Supreme Court's landmark nine-judge Constitution Bench ruling in 2024 overruled India Cement, holding that royalty is not a tax and that states possess the legislative competence to levy taxes on mineral-bearing land and mineral rights under Entry 50.

The Topic Explained

The 2024 nine-judge bench ruling was constitutionally transformative. By severing royalty from the definition of a tax, the Court restored a broader fiscal space to states: they could now, in principle, impose their own levies on mineral rights and mineral-bearing land without being blocked by the Union List override. For mineral-rich states — which host the bulk of India's iron ore, coal, bauxite, and limestone deposits — this represented a significant potential revenue gain and a rebalancing of the federal fiscal compact.

The MMDR Act creates a layered fiscal architecture in which the Centre sets royalty rates for major minerals (such as coal, iron ore, bauxite, and limestone), while the bulk of mining revenues — royalties, auction premiums, DMF contributions, and state-level levies — accrues to the states where minerals are physically located. Minor minerals (sand, gravel, ordinary clay) remain under state jurisdiction entirely. …

Sign up free to read the full noteIncludes the rest of The Topic Explained and Current Context

Related PYQs

2025GS1 Prelims

Consider the following statements:

Statement I: In India, State Governments have no power for making rules for grant of concessions in respect of extraction of minor minerals even though such minerals are located in their territories.

Statement II: In India, the Central Government has the power to notify minor minerals under the relevant law.

Which one of the following is correct in respect of the above statements?

ABoth Statement I and Statement II are correct and Statement II explains Statement I
BBoth Statement I and Statement II are correct but Statement II does not explain Statement I
CStatement I is correct but Statement II is not correct
DStatement I is not correct but Statement II is correct
Sign up free to see the answer and explanation
2016GS1 Prelims

What is/are the purpose/purposes of 'District Mineral Foundations' in India?

1.Promoting mineral exploration activities in mineral-rich districts

2.Protecting the interests of the persons affected by mining operations

3.Authorizing State Governments to issue licences for mineral exploration

Select the correct answer using the code given below.

A1 and 2 only
B2 only
C1 and 3 only
D1, 2 and 3
Sign up free to see the answer and explanation
2019GS1 Prelims

With reference to the management of minor minerals in India, consider the following statements:

1.As per the law prevailing in this country, sand is a 'minor mineral'.

2.The power to grant mining leases of minor minerals lies with State Governments, but the power regarding the framing of rules related to grant of minor minerals lies with the Central Government.

3.The State Governments have the power to frame rules to prevent illegal mining of minor minerals.

Which of the statements given above is/are correct?

A1 and 3 only
B2 and 3 only
C3 only
D1, 2 and 3
Sign up free to see the answer and explanation
2025GS1 Prelims

Consider the following statements:

I.India has joined the Minerals Security Partnership as a member.

II.India is a resource-rich country in all the 30 critical minerals that it has identified.

III.The Parliament in 2023 has amended the Mines and Minerals (Development and Regulation) Act, 1957 empowering the Central Government to exclusively auction mining lease and composite license for certain critical minerals.

Which of the statements given above are correct?

AI and II only
BII and III only
CI and III only
DI, II and III
Sign up free to see the answer and explanation

Practice MCQs

Politymedium

With reference to the constitutional framework governing mineral taxation in India, consider the following statements:

1.Entry 54 of the Union List empowers Parliament to legislate on mines and mineral development in the national interest.

2.Entry 50 of the State List grants states the power to tax mineral rights, subject to any limitations imposed by Parliament on mineral development.

3.The Supreme Court in 2024 held that royalty on minerals is a tax and therefore falls exclusively within Parliament's legislative domain.

Which of the statements given above is/are correct?

A1 and 2 only
B2 and 3 only
C1 and 3 only
D1, 2 and 3
Sign up to check your answer & see the explanation
Polityeasy

Which of the following statements about the District Mineral Foundation (DMF) is/are correct?

1.It was introduced through the MMDR Amendment Act, 2015.

2.Its primary purpose is to promote mineral exploration in mineral-rich districts.

3.It is funded by contributions from mining lease holders.

4.It is mandated to work for the benefit of persons and areas affected by mining operations.

A1, 3 and 4 only
B2 and 3 only
C1 and 4 only
D1, 2, 3 and 4
Sign up to check your answer & see the explanation
Politymedium

Which of the following correctly describes the legal status of 'minor minerals' and the distribution of powers related to them under Indian law?

ASand is not a minor mineral; states have power only to grant leases, not to frame rules
BSand is a minor mineral; states have power to grant leases and frame rules, including rules to prevent illegal mining
CSand is a minor mineral; the Central Government frames all rules while states only grant leases
DSand is not a minor mineral; the Central Government has exclusive power over both leases and rules for minor minerals
Sign up to check your answer & see the explanation

Want the full note, Prelims Facts & MCQ answers?

Create a free account — takes less than a minute.

Create free account