CHENNAI: Tamil Nadu could lose its power to levy taxes, cess, royalty and other charges on mineral extraction with the union government proposing amendments to the Mines and Minerals (Development and Regulation) (MMDR) Act. If enacted, the MMDR Bill 2026 tabled in the Parliament on Monday, is expected to cause significant revenue loss to the state.
In 2025-26, TN earned around Rs 4,400 crore from the mining sector through the regulation of mining and minerals, and the state has set a target of increasing the revenue to around Rs 11,000 crore in 2026-27.
However, the proposed amendments seek to restrict the power of states to levy taxes and other charges on the extraction of both major and minor minerals within their territories. It allows states to impose tax or cess on minerals only in accordance with the conditions or restrictions prescribed by the centre.
The state’s revenue from the mining sector includes Rs 3,000 crore collected as mineral-bearing land tax and Rs 1,100 crore through fees for mining and quarrying concessions granted for the extraction of major and minor minerals.
Additionally, the state earns revenue through mineral royalties, green fund and contributions to the district mineral foundation trust from lessees. The amendments seek to waive existing taxes, cess and other charges imposed by the state government on mineral extraction but remaining unpaid by mining operators from the date on which the amended MMDR Act comes into force.
Proposed amendments override recent SC rulings
This provision is expected to cause additional revenue loss to the state, as crores of rupees in penalties have been imposed for illegal and excess extraction of minerals in Tamil Nadu.
Sources in the Geology and Mining Department told TNIE that a video conference was held a few weeks ago regarding the MMDR Bill, 2026, in which state government officials participated. “However, the contents of the Bill were not disclosed, and the state government was not consulted,” an official said.
The Bill states that under the proposed Section 9D of the MMDR Act, “no tax, cess or such other levy” imposed by whatever name, shall be imposed by a state government on mineral rights. The provision further states that the state government can impose any tax on minerals, only in accordance with the conditions or restrictions prescribed by the central government.
The proposed amendments also seek to override the recent judgment of the nine-judge Constitution Bench of the Supreme Court, which upheld the power of states to levy taxes on mineral-bearing lands and clarified the distinction between royalty and taxation.
According to a retired official, land is a state subject and minerals are vested in the state, but the state’s power to levy taxes is subject to the constitutional and legislative framework laid down by the Parliament. “Using this provision, the union government is seeking to restrict the state’s power to collect taxes and other levies on minerals. The state government will have to approach the Supreme Court if the Bill is passed in Parliament,” he said.
What’s in the Bill?
The state government can levy taxes, cess, royalty and other charges on both minor and major minerals only on the basis of the conditions and restrictions imposed by
the union government
