The Mines and Minerals (Development and Regulation) Amendment Bill, passed by Parliament on August 13, restricts states from imposing separate taxes or cesses on mineral rights or mineral-bearing land unless specifically permitted by the Centre. Mines Minister G Kishan Reddy clarified that the amendment applies only to major minerals such as iron ore, coal, bauxite, manganese and copper. Minor minerals such as sand, gravel, ordinary clay and building stone fall outside the Bill’s scope. According to the minister, the Centre aims to keep the prices of these critical minerals in check, as any increase would raise the cost of infrastructure projects and burden ordinary citizens. He also expressed concern that higher domestic prices for coal or iron ore could drive up imports, which India seeks to curb to limit foreign exchange outflows.
The hurried passage of the Bill has angered several resource-rich states. The Centre says the new law would affect 11 mineral-producing states. Most of them opposed it, contending that it undermines their revenue-raising powers and encroaches on fiscal federalism and state autonomy. The Union mines ministry countered that the states’ share of mineral revenues has risen from 65 percent in 2014-15 to 88-90 percent in recent years. It emphasised that states would continue to collect statutory payments, including royalties, auction premiums and contributions to the states’ district mineral foundations.
So why the objection? Several states, already under severe financial strain since the GST regime curtailed their tax revenue sources, are feeling the pinch more acutely now. But another dimension merits examination. Have major mining companies raised concerns about price differentials after some states raised, or threatened to raise, mineral prices? It is common for companies to enter into long-term agreements with state governments for uninterrupted supplies of raw materials, and they are generally unwilling to absorb significant price increases. Moreover, if coal price rises in one state while remaining lower in another, companies planning fresh investments could simply shift their operations to the latter. In an ideal scenario, such competitive pressure would encourage states to keep raw-material prices low to attract greater investment.
This raises a question over the Centre’s stated rationale. If its primary objective is to ensure greater uniformity in mineral prices across the country, the argument may not entirely hold water. Competition among mineral-producing states, after all, could itself act as a check on prices—while giving states some room to use their resources to bolster revenues and attract investment.